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Tightening credit may hurt your rating
BY CANDICE CHOI The Associated Press

NEW YORK — Don’t throw out that letter
from your credit card company. It may be notifying you of a reeled-in credit line, an interest
rate hike or even an account closure.
In this recessionary climate, credit card companies across the board are tightening the reins
on card holders to minimize their expo-O sure to risk. Such actions could hurt your credit score and, in turn, your ability to n get an auto loan, mortgage or even another credit card. So heading into the holiday shopping season, make sure you’re
t aware of any changes to your credit card terms.
h In coming weeks, for instance, American Express is instituting a broad-based e interest rate hike of 2 to 3 percentage points on card holders. The hikes are the
result of an expected rise in charge-offs, M or balances written off as not being paid, the company said earlier this month.
o Across the industry, credit card chargeoff rates rose to 6.8 percent in August, a n 48 percent jump from the same period
e last year. According to Moody’s Investors Service, it was the 20th consecutive y year-over-year increase.
Moody’s expects charge-offs across
the industry to continue rising into next
rates seen during past recessions.
    Further pressuring credit card companies are new industry regulations set to be adopted by the Federal Reserve later this year. One proposed regulation, for instance, would ban credit card companies from raising interest rates on existing balances.
    “The new regulations are going to hamstring [card companies’] ability to manage accounts the way they have in the past,” said John Ulzheimer, president of consumer education for Credit.com.
    To protect your credit score through these times, keep these points in mind.
WHAT TRIGGERS A CHANGE
    Even if you’re not doing anything differently, lenders may be clamping down on your account. That’s because credit card companies are reevaluating their criteria, said Carol Kaplan, a spokeswoman for the American Bankers Association, an industry group.
    In a robust economy, for instance, a $15,000 balance may not have triggered any alarms. Today, it may be reason for a higher rate or a lower credit line, Kaplan said.
    Other reasons lenders may tweak terms include late payments, partial payments or exceeding credit limits — even if such behavior didn’t provoke changes before.
    Not using your card often enough could also be cause for a change or even prompt the company to close the account.
    “The bottom line is, card issuers are looking for a reason to say no. They’re going on defense and minimizing their exposure to risk,” said Greg McBride, senior analyst at Bankrate.com.
NEW REGULATIONS COMING
    Credit card companies may also be changing terms to gird for new regulations set to be adopted by year’s end.
    The Federal Reserve is still ironing out the details, but one proposal would ban companies from raising rates on existing balances; hikes could only be applied to future purchases.
    Another proposed regulation would prevent companies from punishing card holders for reasons unrelated to their account. Right now, companies can raise rates or lower limits based on information that shows up on credit reports, such as taking out new loans or defaults on other cards — whether or not such activity had an impact on your credit score.
HOW TO PREVENT A CHANGE
    One way to guard against toughened terms is to keep more than one credit card. That will give you the option to transfer balances or use other cards if one issuer takes action against you, said Ulzheimer of Credit.com.
    Checking your credit score periodically to make sure it’s clean can also help fend off unwanted changes. It’s also important to monitor to prevent identity theft.
    On Citigroup Inc.’s financial literacy Web site for consumers (www.usecreditwisely.com), the company also suggests immediately notifying companies whenever you move so bills aren’t late.
    Other measures you can take are obvious: Pay your bills on time and whittle down debt as much as possible.
NEGOTIATING BETTER TERMS
    The first step is to read any mail from your credit card company. Notification of new terms may also be included in your monthly statement.
    If your bank hits you with a higher interest rate, call and ask it to reconsider if you think the change is undeserved. Ask the customer service representative if he has the authority to make changes to your terms. If not, ask to speak to a supervisor who does, said the ABA’s Kaplan.
    “Tell them how long you’ve been a customer for and explain what went wrong. You can achieve a lot just by calling and being reasonable,” she said. If you’re not satisfied, you can always get rid of the card.
    For those with great credit and low balances, remember that credit card companies are fighting to hold onto you, so it may pay to shop around.