I mentioned some of the new rules that were put into place with the CARD act, so you may be wondering, “Will these new rules affect my credit score?”
In a word, no. Of course, it’s not entirely that simple, but the rules were not intended to improve your credit score. They were intended to improve the credit atmosphere and curb lender abuses. Some of those may help your credit score, but that’s mostly incidental to the true purpose.
New Statements May Impact Your Balances
If the new statement designs encourage you to pay off your balances faster and reduce your debt to credit ratio, then your score will improve. So in a way, you could say it’s because of the CARD act, but it‘s also due to you getting your act together.
New Fee Limits Won’t Impact Your Score
Late fees themselves aren’t factored into your credit score. Payments made more than 30 days late are, but that has nothing to do with late fees or overlimit fees. The new rules don’t limit acreditor’s ability to report late payments.
New Interest Rate Rules Won’t Directly Impact Your Score
The new interest rate and payment rules won’t directly impact your credit score, but a lower rate and new rules that payments over the minimum must be applied to the highest rate balances may reduce your debt faster. Lower debt equals a higher credit score.
Tighter Lending Standards Might Impact Your Score
There are two ways that the tighter lending standards imposed because of the new rules could impact your credit score:
Your credit limit is reduced because you’re deemed too high a risk. If your limit is greatly reduced and you still carry a balance or use more than 30% of your available rotating credit, yes, your score will go down.
You make more credit applications and are denied. If you have to keep applying for credit because you don’t qualify under the tighter standards, your score will also suffer. If you’re rejected, you’d be better off fixing your credit and budget issues than you would be applying for credit with another company.
New Ads for Free Credit Scores
Aside from the CARD act, the FTC also imposed new standards on the free credit report companies. They now have to be clear that they’re offering credit monitoring for a monthly fee and the credit reports are included in that. Instead, most sites now offer a free credit score with a free trial of credit monitoring.
The new credit card rules weren’t targeted at credit scores, but if they help you better manage your credit and pay down balances, then your credit score may see a boost. Just don’t expect it overnight!