When the getting was good, I was “getting.” Now that it’s tough all over, I have adjusted my thinking. My friends have been asking what I am doing right now — especially as it pertains to credit card applications, usage, and behavior.For the past year I have been laying low — applying for cards sparingly. The climate really started changing after the summer of 2007. You could feel the difference in the air. Approvals didn’t seem as easy and, even when there was an approval, the initial limits on those new cards seemed lower. That’s not a recipe that I like. I like easy approvals and fat credit limits. Now that those kinds of approvals have faded (relatively), so has my appetite for new credit. I’m being extremely picky right now. I’ll only apply for a card if it fits into my plan and it’s a card that I just have to have. Right now, there is nothing calling my name (although I have been thinking about getting a Discover biz card). As a result, I remain on the sidelines (for now).In addition to my reduced appetite, I’m also well aware that creditors are skittish. We’re living in a very uncertain time right now. See Lehman Brothers, Merrill Lynch, American International Group (AIG), Morgan Stanley, Washington Mutual, and every other financial institution that has seen its business change over night. Creditors are changing the way they do business. In fact, they have to change. If you’re not using your credit right now, you should expect to see some of it disappear. Just a year ago, you could literally put a card in the drawer and use it every six months. That was good enough to keep the card open and the credit limit intact. That’s all changed. Card companies are now looking for inactive credit cards (and lines of credit) and closing them. (See my recent story on Citibank’s closure of my Citi Flex line of credit.) They’re also looking at lightly-used credit cards. If you have a hefty limit on a card that you barely use, you should not be surprised to see the limit reduced. Banks are cutting back their exposure to credit-card customers. I’ve recently been using my inactive cards (ones that I have not used in three months). I’ve put charges on all of them. I’m trying to stay off the radar screens of these card companies that are just looking to close accounts that haven’t been used recently. I’m also stepping up the spending on cards where I have pretty big credit limits. I’d like to keep the limits intact, so I’ve stepped up the spending on a few of them (normally I would spread the spending around to more cards). As for my behavior, I am not doing anything that appears risky. Any creditor that looks at my credit report right now will see that I have not been loading up on debt. In fact, I have been paying bills off before the billing statement even closes (except with my American Express account; I don’t believe that most American Express customers pay their bills before the statement closes; I don’t want to stick out). At the beginning of the month, I believe that every one of my accounts was reporting a $0 balance (which was an accident; I like to always have at least one balance reporting so that FICO doesn’t nail me for not using my credit). I’m still using the cards, but I am simply not allowing the balances to report to the credit reporting agencies. This is what works for me. You’ll have to figure out what works for you.If you’re still operating under the old rules (that existed last year), I think you’re making a mistake. Times have changed. The credit market is tight. Creditors are on the hunt for underutilized accounts. They’re also looking for accounts that are inactive. Though there is no guarantee that your accounts will be spared, you’d do well to take a close look at them. Make sure you’re using them. Make sure that you’re not giving creditors any reason to close them.This is the time to be flexible in your thinking. If you’re not willing to change, you should expect to get knocked out.
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