9/30/08 3:37 PMCard Issuers Tighten The Screws - Kiplinger.comPage 1 of 3http://www.kiplinger.com/features/archives/2008/09/card_issuers_tighten_standards.htmlYOUR MONEY | CREDIT, COLLEGE, TAXES AND REAL ESTATEHome > Your Money > Credit & Money Management > Feature PRINT EMAIL DEL.ICIO.US DIGG THIS EDITOR'S PICKS: TOP 3A New Life for ParentsRobots Branch OutNo Tax Bill for this FundTOP 5: YOUR MONEY TOOLSHousehold budget worksheetFind the best state 529 plan for youWhat will it take to pay off mybalance?How much can I spend for housing?Easy-to-use tax withholding calculator10 Things That Will Change15 Things You Need to Know About the Panic of2008What Should Investors Do Now?6 Things To Do While The World EndsTODAY'S MOST E-MAILED STORIES Here's how you can stay in their good graces and avoidsky-high rates.September 29, 2008CREDITCard Issuers Tighten The ScrewsDebra Tanner was thrilled earlier this yearwhen her longtime credit-card issuer cut herinterest rate nearly in half, from 16% to 9%.But a few months later, the thrill was gone.In August, Tanner discovered that the cardissuer, HSBC Bank, had jacked up her rateto 30%. In fact, the rate hike had gone intoeffect several billing cycles earlier withoutTanner noticing.When she called to protest, a customer-service representative told Tanner that herrate was being raised because she had beentwo days late with a payment. The bankrefused even to consider restoring her lowerrate until at least November.Tanner, who owns a gift-basket business inClearwater, Fla., considers herself aresponsible borrower. The issuer has steadilyincreased her credit limit (to $16,000currently) since she got the card in 1993. "Idon't see anything in my record that justifiesraising my rate so high," she says. AfterKiplinger's contacted HSBC, the bank agreedto lower her rate to prime plus fivepercentage points -- about 10% recently --and to give her credit for the additionalinterest charges she had paid since March.What Tanner learned the hard way is thatlenders are not only skittish about extendingnew credit but are also clamping down onexisting customers. In July, a survey ofsenior loan officers by the Federal ReserveBoard found that during the preceding threemonths, 65% of U.S. banks had tightenedtheir credit-card lending standards by raisingrequired credit scores or lowering existingcredit limits. That was up from the Aprilsurvey, in which 30% of banks reportedSept. 30, 2008Top ProductsFEATURED PODCASTSell Your Home FastEven in a crummy market, you can close thedeal if you prep it well and price it right.Kiplinger.comThe BasicsStarting OutInvestingYour MoneyYour RetirementSpending WiselyYour BusinessGuides & CentersOur Best Lists9/30/08 3:37 PMCard Issuers Tighten The Screws - Kiplinger.comPage 2 of 3http://www.kiplinger.com/features/archives/2008/09/card_issuers_tighten_standards.html6 Things To Do While The World EndsCard Issuers Tighten The ScrewsMorePLUS: See Our Slide ShowsKIPLINGER'S MONEY POLLWill the government's $700 billion plan to rescue the financialmarkets succeed in stabilizing the economy?tightening their standards.A year ago, a credit score of 720 had lenderslining up for your business; today you need ascore of 740 or higher to get the best rates,says Ben Woolsey, director of marketing andconsumer research at CreditCards.com. Bankof America, for example, says it's looking forhigher FICO scores, although it wouldn'tspecify a number.And a higher score alone might not beenough to keep lenders happy. They're alsoscrutinizing your credit-card use morefrequently, looking at where you live andwhat you buy. HSBC, for example, says ithas tightened its credit criteria and will"continuously monitor changing market andeconomic conditions."In addition, says Woolsey, lenders are lesswilling to cut you slack for minor, one-timeinfractions. And you're less likely to receivesolicitations for new credit or to getautomatic increases in your credit line. "Thedefinition of what makes a good customerhas gotten a little more stringent," says JohnUlzheimer, president of consumer educationfor Credit.com.Risk factors. In some cases, credit-cardcompanies are using geography as a riskfactor, especially if you live in an area that'sexperienced declining home prices or if youhold a subprime mortgage. For instance,Discover is cutting back on marketingprograms in "rising-risk areas" and limitingautomatic credit-line increases. Discoverdidn't cite specific risk areas, but states suchas California, Florida and Nevada have beenhit hard by home foreclosures.Your work or business could also be a factor. American Express says it's reducing credit lines forcardholders at greatest risk -- including small businesses in the construction, home-building andmortgage industries.Some card issuers are also paying closer attention to your spending habits. In June, the FederalTrade Commission sued CompuCredit Corp. for failing to disclose to cardholders that thecompany would monitor certain payments -- to bars, massage parlors and marriage counselors,for example -- and could reduce their credit lines as a result. There's nothing wrong with thatkind of snooping, as long as card issuers tell customers that they use such data to evaluate risk.CompuCredit says the FTC's allegations about its marketing practices are "untrue and withoutmerit."What to do. Despite the increased scrutiny, you can still satisfy card issuers' requirements.Pay your bills on time and keep your balances as low as possible -- preferably to 25%or less of your credit limit.Use each of your cards at least once every quarter. That will prevent a lender fromclosing an account that it deems inactive, says Ulzheimer.Look elsewhere if your card issuer cracks down. If you have a stellar record, you stillhave leverage with other lenders, says Scott Bilker, founder of DebtSmart.com.Don't close old accounts. That increases the ratio of your outstanding balance to yourSPONSORED LINKSFree Forex IntroGuideLearn the Basics ofForex Trading with aFree Guid...Select card typeYes, the worst is behind us.No, more trouble is ahead.Not sure9/30/08 3:37 PMCard Issuers Tighten The Screws - Kiplinger.comPage 3 of 3http://www.kiplinger.com/features/archives/2008/09/card_issuers_tighten_standards.htmlMORE: Kiplinger.com | Your Money | Credit & Money ManagementTOOLS: E-Mail Article | Print Article | Reprint Article | Content Licensing & PartnershipsE - MA I L ALERTS: Keep up-to-date with the latest