ANSWERS: 1
  • New 2009 U.S. legislation requires that credit card companies allow people to opt out of credit cards when the company changes its policy. While opting out of credit has no effect on a credit score, it may have a "ripple effect" on other credit score factors.

    Identification

    Opting out of an interest rate hike and closing an account does not directly affect a credit score, according to Leslie McFadden of BankRate.com.

    Effects

    Opting out of a credit card can lower a score by decreasing the length of credit history, which counts for 15 percent of a person's score, and raise their debt utilization, which counts for 30 percent.

    Features

    Opting out of a credit card still requires the debtor to pay his balance, but the creditor may not change the interest rate, consider the balance in default or demand immediate reimbursement. As long as a balance exists, the consumer can make on-time payments, which boosts payment history in the FICO score calculation.

    Considerations

    When considering an opt out, consumers should compare the interest rate (or other agreement) change with their overall debt levels. Closing a dormant account or one with a low balance usually increases the ratio of debt used to total credit available.

    Tips

    As long as a person pay his bills during the grace period, then any changes to a credit policy (such as an interest rate increase) cost him nothing.

    Source:

    BankRate.com: Does opt-out preserve rates on credit cards?

    NJ.com: Opting out of a rate hike may affect your credit score down the line

    More Information:

    BusinessWeek.com: Anatomy Of A Credit Score

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