Will the New CARD Act Impact Your Credit Score?

In the current financial climate, it is more difficult than ever to obtain credit. Getting a loan for a house, car, or even for a small business depends almost exclusively on having excellent credit. People work tireless to bump up their credit scores over time so they can secure these important loans.

Chances are if you have a credit card, you have received a statement in the mail informing you about changes to your account. Many of the changes are outlined in the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, implemented into law as a way to prevent credit card companies from predatory tactics once used to extract funds from cardholders.

However, card companies were proactive in making changes that would make up for lost revenues wiped out by the CARD Act. These methods include annual fees, non-activity fees, declined transaction fees, international purchase fees, paper statement fees, zero balance fees, and multiple penalties. The Federal Reserve is proposing new rules which could come into effect as soon as August that would curb some of these fees. While these fees hurt consumers, equally damaging are the potential threats to credit that the new tactics could have.

One of the Act’s effects is the reduction of customers’ credit limits by credit card companies. Card companies are looking to raise more cash reserves, and limit their risk to credit default. However, when a credit card company lowers your credit line, it has a negative effect on your credit score.In addition, for individuals already carrying debt on their credit card, the tightening of the credit limit puts an even tighter squeeze on the consumer. With some of these tactics, fed-up consumers may consider closing their accounts. That action also might have a negative impact on their credit scores – it lowers the amount of credit available to the consumer, thereby weakening a positive mark for a credit score. Another thing to keep in mind – credit scores depend heavily on the length of time a credit line is open. So, if you have had a credit card for a long period of time and decide to close the account, you are losing a positive aspect of your available consumer credit.

Many people who have fallen into financial trouble at the hand of credit card companies have turned to debt settlement programs that help them navigate these deep, difficult waters. A debt settlement company can help you settle your credit card debt for less than the amount that you owe. Greenshield Financial Services is a Financial Health Management Company that specializes in a debt settlement program that provides debt relief, debt help, and bankruptcy to help you learn how to get out of debt.