It’s all too easy to swipe that credit card with the holidays on the horizon. But before you do, make sure your credit score isn’t suffering. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act, may secure you from retroactive rate hikes, but issuers still have plenty of tricks up their sleeves. Loopholes in the law allow them to cut limits or even close your account if usage is low. Before digging yourself into a ditch, make sure you bring your ladder.
Check your report
Every consumer is entitled to a free credit report every 12 months from all three major credit bureaus. That means you can request a report every four months from a different bureau. Checking your report can help you correct errors and delinquencies that can lower your score. Visit AnnualCreditReport.com to request a report and check out Bankrate’s free FICO score estimator to see the range of your score.
Use it or lose it
Issuers may close an account that is seldom used or lower the credit limit. Institutions are profit-driven, and an unused credit card is not profitable. Check the rules and regulations of each of your cards carefully, and be sure to meet the minimum requirements. An account closure or limit reduction can damage your credit score.
Shrink your credit balance
Paying off purchases and outstanding balances not only saves money, but it also provides security against unforeseen and undesirable account changes — and it boosts your score. The higher your card limit is and the less you use, the better you’ll look to credit issuers.