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Bad credit? It’s getting tougher to get a card

Matt Schulz

The freewheeling, darn-near-everyone-who-wants-a-card-gets-a-card times that the credit card business has experienced for the past few years might finally be coming to an end, according to Federal Reserve data released on Monday.

The Fed’s Quarterly Senior Loan Officer Survey showed that more than 40 percent of U.S. banks – including 58 percent of small banks – have recently tightened their lending standards when it comes to subprime credit card borrowers. (That’s compared to just 19 percent of all banks that said they have loosened them.) 

In plain English, that means that they’re making it harder for folks with less-than-stellar credit to get approved for a new credit card. The tightening is, in part, a reaction to near-record consumer credit card debt and a rise in the number of credit card holders who are late with their payments.  

Now, this is hardly a seismic shift. In many ways, this is simply a return to normalcy after several years of near-unprecedented good times in the credit card business. (For example, delinquencies may be rising, but they’re still quite low by historical standards. Recent upward movements essentially represent a reversion to the historical mean.)

However, the change is still significant. In recent years, there was a tremendous amount of growth in credit cards being given out to so-called subprime customers, those with subpar credit. That’s now begun to shift.

Ultimately, the big takeaway for consumers is this: Don’t slip up or it could get harder for you to get your next loan. That’s especially true if you’re not at the top end of the credit spectrum or if you are trying to borrow from a small bank.

So how do you maintain a good credit profile? People can get intimidated by credit and overthink it. There are plenty of factors that go into a credit score, but it basically comes down to three things:

  • Pay your bills on time every single month.
  • Keep your balances low.
  • Don’t go crazy applying for credit too often.

Do these three things over time – lather, rinse and repeat – and your credit’s going to be just fine. Of course, it can be easier said than done, especially the part about keeping those balances low, but it’s incredibly important.

There is one aspect of maintaining good credit that should be easy, however, thanks to technology. Automatic payments mean there’s no longer any excuse to be habitually late with a credit card payment. They’re offered by virtually every bank, and they’re so simple to set up.

If you haven’t set up automatic payments yet, take some time today to make it happen. Your credit score will be glad you did. Just make sure that you set it up to pay more than the minimum payment each month. Otherwise, you can find your debt growing faster than you’d imagine.

See related: Zero to 750: What’s the fastest route to a high credit score? 7 smart money and credit tips from millennials,

 

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