Even though it’s hard to deal with inflated prices and high unemployment, now is the time to start working harder to improve your credit score. With new government regulations going into effect in early 2010, most lenders will put into place much tougher terms when considering extending credit to consumers with less than favorable credit ratings. Gone are the days of offer after offer coming in with the daily mail. If you manage to secure a credit card despite a mediocre credit score, it’s likely that it will carry a higher interest rate than you may have been able to get before the new laws are in place.
The reason is simple. Credit card companies’ profits have always relied on those that don’t have good credit, often pay late, carry a credit card debt balance and spend more than they can reasonably expect to pay off. As the new laws go into effect, banks can no longer use these debtors as a means to collect exorbitant interest and late fees. Banks will be required to only extend credit cards to those with a proven ability to pay off a balance and will no longer be able to offer credit cards to college students that have not built a credit rating unless the student has a cosigner. The regulations will chip away from the credit card companies profits and they will have to be more diligent in making sure that credit that they extend will likely be paid off.
All in all, the new federal regulations are designed to protect the consumer from overextending their credit and getting so far into debt that the solutions are too few or too difficult to carry through. While having good credit is important in this day and age, the laws will force more people to consider fighting to pay off debt and reestablish a good credit standing. A solid debt consolidation plan and a budget may be the answer for those who want to build up their credit score.
