Orlando Real Estate – CENTURY 21 Solutions Realty
A large part of a consumers credit score (30%) is based on the amount of credit available as compared to the outstanding balances on accounts, known as the credit utilization ratio. This ratio can be easily manipulated by banks and credit card issuers. For instance, if you have a credit line of $10,000 and a balance of $4,000 this equates to a ratio of 40%. Consumers with credit utilization ratios less than 50% are considered more desireable and therefore are given a much higher credit score. If the credit issuer reduces the credit line to $5,000 this increases the credit utilization ratio to 80% which in turn, lowers the credit score.
Over the last year credit card issuers have been reducing and closing consumer’s lines of credit. Many consumers are now seeing these same issuers ask for rate increases because the consumers credit score has fallen. Credit issuers cite, the credit score indicates a higher risk and therefore a rate increase is justified. In actuality, the risk has not increased at all, it is simply a byproduct of the issuers credit line reductions.
The question that comes to mind is whether or not the credit issuers have reduced credit lines to in turn increase rates. If this is an intentional act to manipulate the credit system is this not a fraud perpetrated on the American consumer.