by Stacy Francis, CFP®, CDFA
A report from a recent Savvy Ladies meeting revealed that many of you are having your lines of credit slashed. I thought a few pieces of advice could come in handy. A couple of months ago, I touched on the topic in a blog entitled “Will a Cut in Your Line of Credit Hurt Your FICO Score?”, concluding that the extent of the damage can range from a minor nuisance to near disaster, depending on your credit history, score, and accounts. This time, I will focus on preventative measures, namely:
- Use your cards. Many times, inactive accounts are the first ones to go (if you don’t use your cards, unless you pay an annual fee, you don’t make the bank any money). This doesn’t mean you should go on a shopping spree. Simply charge something once in a while, to let the lender know you are still using the account.
- Keep your outstanding balances low. This is always advisable, but now more than ever. Companies like American Express have been known to reduce customers’ lines of credit to below their outstanding balances, further adding to the hardship of indebted individuals.
- Keep working on your FICO score. It is not hard to see why troubled banks cut lines of credit for high-risk individuals; they simply cannot afford to have them default on their debt. By proving to the lending institutions that you are a safe bet, you greatly enhance the chances they’ll let you keep your lines of credit. If you have stellar credit, you can use this to your advantage, kindly informing institutions threatening to reduce your lines of credit that you could easily take your business elsewhere.