EXPERTS: WATCH BALANCES, CHECK SCORE
Consumers find it harder to get, keep credit
1. Don't run up bigger balances on your credit cards than you have in the past.
3. Expand the group of financial institutions with which you would consider doing business.
4. Check your credit score at CreditKarma.com or MyFICO.com.
5. Make sure your credit report is free of old and inaccurate information.
Losing his job in June as head of a health-care non-profit was a blow for Christopher Laxton, but the Oak Park resident and his wife had a cushion: some savings and a home equity line with Chase that had $40,000 to $50,000 in borrowing capacity left.
Then in August, the big blow came. Chase sent a letter saying the bank had reduced their home equity line and frozen it at the amount they already had borrowed.
"From our perspective, the safety net was suddenly gone," said Laxton, who has two children in college and has yet to land another job. "It made us look at how long we could last before we went down to the local Starbucks to see if they were hiring."
Stories like Laxton's have become more common as the nation's economic woes deepen and a credit crunch has morphed into near paralysis. Finding new credit or just holding on to what you have has gotten extremely difficult. And the impact is not limited to consumers who are swimming in debt or have abused credit in the past.
"We have definitely been hearing from a lot of people, even those with great scores, that they have been getting their credit lines cut or closed," said Gerri Detweiler, credit adviser for Credit.com, a personal finance Web site. "Issuers are looking at their exposure, and they are trying to make sure if things in the economy continue to get worse, they don't end up holding the bag."
While it is the financial institutions that decide whether to make or continue a loan, credit experts say there are some proactive steps you can take, and a rather lengthy list of things to avoid, to make yourself appear as creditworthy as possible.
A simple step in your search for credit is to expand the horizon of institutions with which you would consider doing business. Think about becoming a member of a credit union, and keep an eye out for new community banks that may be springing up and appear eager to win business.
But it's important to remember that lenders have parameters they monitor to determine someone's credit worthiness. If you:
•Fall behind on your mortgage or car loan, it will set off alarm bells at every company that has extended you credit.
•Start running up bigger balances on your credit cards than you have in the past, that's another red flag.
•Used to pay an extra $50 a month over the minimum on your credit card but now pay the minimum, that could cause the card issuer to cut back your line.
•Always paid on time, but now the check arrives a few days late, that's an unwelcome change to your payment pattern, and there are likely to be consequences.
"Even if you're paying the minimum, make sure it's by the due date," advised Chase spokesman Tom Kelly. "A lender who sees a borrower falling behind could choose to reduce the line of credit the borrower has."