Wednesday, July 25

Why a Good Credit Rating Can Hurt You

Did you know that having a good credit score or credit rating can hurt you if you're not careful? Like anything else, if not used in moderation, good credit can hurt you. Those who have really good credit need to be extra vigilante at protecting their credit rating. An article this morning in the One-Day Wonder section on suggest that even those with Prime credit are beginning to show signs of having trouble repaying their obligations.

How can this happen? Why would someone with really good credit all of the sudden find themselves not being able to make their payments on time? Is it the economy? Did they have a change of heart? Maybe they fell ill or perhaps they lost their job? More than likely though, they overextended themselves by taking advantage of sweet offers of credit and now are beginning to struggle.

The folks that have the really good credit ratings are able to get credit just about anywhere, and from nearly anyone. It isn't uncommon for these folks to receive numerous promo credit card offers and home equity loan and credit line offers every day! Talk about temptation!

Because the rate offers are so good, 1.9% for 90 days, 0% for 12 months, how can one resist? Especially if you have a free balance transfer at 1.9% for 120 days, and are paying another card 12.9%? It only makes sense to open the new account and transfer the balance to the lower rate card.

We can be lured over time into taking these offers and before we know it, the honeymoon period is over and because we taken so many offers, have so many balances from so many different places, the bills become unmanageable. To make things even worse, the payments will double, even triple when the rate adjusts from the discounted rate of 0% to the Prime rate plus 7.99%. And, because the credit report shows a number of accounts recently opened, even the friendly local banker might not feel quite up to granting more credit, making it very difficult to consolidate if it should come to that.

So, a good credit rating or score can hurt you if you're not careful. Don't be tempted into opening an account just because it's offering a low initial interest rate. Use credit sparingly, especially revolving credit. Don't let your good credit rating get you in over your head. Everything in moderation, which includes borrowing money.

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