Conscientious consumer wants more credit for avoiding bankruptcy

Q: Three years ago, I had a stellar credit score. Then I lost my job. I had savings to tide me over, took part-time jobs, and paid my bills on time. But I let my credit-card debt get high. I started working this past year, and all my debt will be paid off shortly. But my credit is shot because of the perception that my debt was too high. Why am I being penalized? If I didn't have the savings, I would have gone bankrupt. In addition, are credit bureaus taking advantage of women? My husband and I both had charge cards at the same store. I earned three times as much as he did, yet when we went to make a major purchase, my credit limit was not extended but his was. Isn't this a form of sex discrimination?
C.J., via e-mail

A: You made the right moves, says Michael Simonds, a certified financial planner in Shelby Township, Mich. He believes that your credit scores, which are a mathematical analysis of the way you take on debt and then repay it, will recover once your debt load drops and creditors see that your use of credit has stabilized.

Credit scoring models consider hundreds of factors in establishing a borrower's score. When you fully utilized your credit during that jobless period, your risk profile rose - and your credit score sank - due to your higher use of credit and the increased possibility that you may not have been able to dig yourself out of debt. When credit-card or revolving-credit balances are high, scores suffer.

But that beats the alternative - bankruptcy - and had you not had savings, you would have indeed been in a serious credit situation, says Mr. Simonds. "All the more reason to have money set aside in the event of a lapse in employment or another life-changing event."

As for sex discrimination, Mr. Simonds says it's common to see that one spouse has more borrowing capability than the other. Credit ratings and scores don't know about income. Instead, they focus on whether an individual has had established credit, the levels of credit granted, and the number of open credit lines. They don't take gender into account.