Frequently Asked Questions

Credit utilization is the percentage of your available credit that is currently being used. It is one of the main factor the credit reporting bureaus use to determine one's credit score. Along with age of account, total available credit and other factors the bureaus monitor your activity to provide a snap shot of you finances when you apply for any type of loan or extension of credit.

First make sure that you really want to cancel the card. When you drop an account you will be dropping the amount of your available credit, one of the major factors in determining your credit score. You may want to 'drop' the card into a drawer and use it once a year. If you do, really, want to drop a card, call the customer service number on the back of the card and ask for specific instruction on cancelling the account. The bank will probably require a written or faxed document to complete the cancelation.

A fixed APR will remain at a given rate for a defined period of time. A variable rate is usually tied to the prime interest rate as published by the Wall Street Journal and is expressed at prime + some rate i.e.: Prime + 3.5% where your rate would be 8.5% if the prime rate was at 5%. Whenever the Prime rate changes, the variable rate loans and credit card balances change too. Sometimes up, sometimes down. Depending on the general economy as a whole.

Your account will be assessed an over-the-limit charge of somewhere between $25 and $40. Another revenue stream for the banks, these fees are pure profit for the banks since they will probably approve the charge anyway. Some banks will even raise your limit slightly in the hopes that you will bump into the limit again and generate another fee. Consumer must be smarter than the banks and know their limits. Many issuers offer the tools to monitor your balance via online access, email alerts even cell phone access. Finally if you are going to hit that ceiling, call the bank ahead of time and have your limit raised. Most will do this over the phone and will prevent that fee from being charged.

On average, Americans have around six credit cards. Some of these are store cards and are viewed as such by the credit bureaus. A reasonable number of general purpose cards is around 4. This can be further justified by having cards of different brands, one from each; American Express, Discover, MasterCard and Visa. This allows you to enjoy more specialized benefits and can take advantage of unique offers from the different issuers. It is also beneficial from a credit report point of view to have accounts with different, large banks.

The easiest and probably best way to handle this situation is to immediately contact eh card issuers and either put a freeze on the account or drop the credit limit to the current balance. This prevents any further charges. You could then get a balance transfer suitable card in your name only and clear the old balance and then cancel the card or again lower the limit to a very small amount. Also make sure to inform the issuer that you will not allow any automatic increase in the line of credit on that particular card. Otherwise the bank may raise the limit without your knowledge.

There are some offerings targeted to those with bad credit. Most carry a high interest rate with annual or monthly fees. These measures are necessary to generate some incentive for the bank to issue the card. If you are sincere about rebuilding your credit one of these cards can be an excellent vehicle to credit recovery. They all report to the credit bureaus so your good standing will help with your score. Most will review your account after a period of time and increase your limit if you keep the account in good standing. After some length of keeping a sub-prime card active and current, you can then try to step up the ladder with a entry level, main-stream card. Just remember you will continue to be just a few missed or bad payment from bad credit again so due diligence is required.