Fewer Credit Cards for People with Bad Credit

Changes within the credit industry could soon put cards out of reach for people with bad credit scores. These changes are happening now, and they will continue through 2010. Here’s what you should know:

I don’t usually write about credit card topics on this blog, because it has little to do with the real estate focus I maintain. But there are some new developments in the financial industry that might interest my readers. In particular, I’m talking about new rules and regulations that will apply to the credit card industry, and how they will affect people with bad credit scores.

Here’s what it all boils down to. It’s about to become a lot harder for people with bad credit scores to get credit cards in the U.S. You can call it a double whammy if you like, because there are two primary causes. The most obvious cause is the current state of the economy, and how it affects the credit card industry. A lesser known (but equally important) cause has to do with new rules being applied to the industry.

New Credit Card Rules

Starting on August 20, 2009, credit card companies will be required to give their customers more notice about interest rate increases. Those customers can also “opt out” of the new interest rate and continue paying the current rate on the remaining balance — though they won’t be able to use the card anymore if they choose that option.

There are additional (and even more significant) changes coming to the credit card industry in 2010. After February, these companies won’t be able to increase rates on existing customers unless the customer is 60 days late on a payment, or later.

How it Affects on People With Bad Credit

What do these credit card changes have to do with people with bad credit scores? Basically, customers with bad credit will no longer be a viable business model for the card companies.

In the past, these companies have been able to offset the risk of giving cards to people with bad credit by charging all of these ridiculous fees, for which this particular industry has become well known (notorious?). But the new rules and regulations going into effect this year and next will make it harder for these companies to offset the aforementioned risk. As a result, there will be fewer credit cards given to people with bad credit scores.

Other Limitations of Having a Bad Score

If you are one of the millions of people in this country with a bad credit score, this is certainly not good news. But in my opinion, there are other credit-related limitations that are much worse. It’s harder to get any type of financing when you’re in this financial “club.”

For example, people with low credit scores have a much harder time getting approved for mortgage loans. For me, this is far worse than being denied for a credit card. One is a piece of plastic — the other is a roof over your head. You can be denied for both of these things, based on your credit score.

But you need not worry. With a solid plan and a bit of discipline, you can easily increase your score over time. There is no mystery on how to do this, and I offer plenty of helpful tips right here on this blog.