Your Credit Report Affects Your Cards
If you carry a balance on your credit card from month to month (which I strongly feel should not be done if possible), be extra careful about negative items hitting your credit card.
In the past, credit card companies would raise their interest rates to a card user who misses a payment or two. Missing payments may have been the only reason these companies penalized their customer. Now, according to MSN Money, users will be penalized not only for missing payments to that credit card, but for missing payments to other credit cards.
That's not the end of it. Credit issuers routinely look at their customers' credit reports. Any new negative item sends up a red flag, and the issuer might decide to use that as an excuse to raise their interest rate, effectively deciding that the offending person is a higher risk to the company.
This means that if you, for example, miss a payment on your Bank of America car loan, MBNA may penalize you by raising their interest rate from 11.9% to 25.9%. Here's another example: If you seek approval for a mortgage and it shows up on your credit report, any number of credit card companies may decide that since you are about to purchase a house, you may have less money to put towards credit card debt, increasing risk.
The best plan is to pay the entire balance of your credit cards off each month.
From the article, here are the reasons credit card issuers may raise your rate, with the percentage of banks actively using that particular information:
* Credit score gets worse: 90.48%
* Paying mortgage, car loan or other creditor late: 85.71%
* Going over credit limit: 57.14%
* Bouncing a payment check: 52.38%
* Too much debt: 42.86%
* Too much available credit: 33.33%
* Getting a new credit card: 33.33%
* Inquiring about a car loan or mortgage: 23.81%
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I've had this happen before with an MBNA-issued card. A collections company tacked on an account that was not mine on my credit report and a week later I received a letter from MBNA about changes in my APR from 7.9% all the way up to 23.9%. Customer Service said I was in default of the credit terms even if the information is inaccurate but they gave me a stay on the APR change for 90 days to correct everything. Once corrected, MBNA redacted the APR change and all was well.
Oddly enough, this only happened with MBNA as my other card issuers (Bank of America, Discover) didn't even so much as flinch when this happened. Most other reports I have read around the web also have been from MBNA cardholders as well. As a word of advice, any bank must inform you of any APR increases in writing (this includes monthly statements) before they can change it. This gives you the opportunity to negotiate with them or cancel the card and pay off at the previous rate so keep a close eye and question it if your rates increase more than just a few points.
