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Boosting Your Credit Score To Get The Best Credit Card
Deal
Making Your Credit Rating Work For You
One of the basics of getting the most competitive credit card
deal in the market is to ensure you have the best credit record
possible. Few of us are lucky enough to be earning a six-figure
salary, and many people are likely to have other financial
undertakings that a potential lender will want to take into
account. None of this, however, should preclude you from getting
a top bracket credit rating. Getting a credit score of 700+ may
be beyond some consumers, but lifting your credit rating to a
point at which lenders will furnish you with some of their best
deals is not an insurmountable task.
It can be a stressful time applying for a new line of credit.
Many consumers get upset when applying for a new credit card when
they find out their credit score is low, and they have poor
credit.
A lower credit score can impact the amount of money that
financial institutions will lend you. It can also impact on the
rate of interest at which you borrow. In some cases, the
difference between having an excellent credit rating and a poor
one could be getting a 0% deal on your credit card, and paying an
APR that touches 30%. Sometimes financial institutions won't even
lend you a dime, based on a low credit score.
A variety of factors can impact on your credit score.
Generally speaking, lenders love stability more than anything
else. Paying amounts owed on time is but one of many variables.
It could be that you've lived in more than one address over the
preceding three years; or having borrowings with a variety of
institutions. It could even be down to the fact that you've got
too much credit already at your disposal.
But just what goes into your credit score? A report by the
analytics experts Fair Issac recently broke credit scoring down
into five categories and assessed their importance on the final
rating.
Most important was how you had paid you bills in the past with
the most emphasis on recent activity. Naturally, paying all your
bills on time is good; paying them consistently late is bad.
Having accounts that were sent to collection agencies is even
worse, though nowhere near as bad as declaring bankruptcy. Paying
your bills in a timely and consistent manner contributed to 35
percent of the score.
Next most important was the amount of money you owe and the
amount of available credit at your disposal. The assessment of
outstanding debt fell into several categories, and included
credit cards, car loans, mortgages, home equity lines, and so on.
Also given consideration was the total amount of credit
available. If a customer has 10 credit cards that each have
$10,000 credit limits, that totals $100,000 of available credit.
Generally speaking, people who have a lot of credit available
tend to use it. This makes them a less attractive credit risk.
This amounts to 30 per cent of the total credit score.
Also impacting on credit scores is the length of credit
history (15 percent). The longer a customer has had credit -
particularly if it's with the same financial institution - the
more points they get.
The mix of credit contributes 10 percent to the credit score.
Customers with the best scores have a mix of both revolving
credit, such as credit cards, and installment credit, such as
mortgages and car loans. Statistically, consumers with a richer
variety of experiences are better credit risks. As far as banks
and credit card companies are concerned, they know how to handle
money.
The last important factor taken into consideration is new
credit applications (10 percent). If you've applied for several
lines of credit in the past few months this will negatively
impact your credit score.
The antidotes to this are simple. Pay your bills in a timely
manner, particularly in the months leading up to an application.
Close unused retail store cards, credit cards and old bank
accounts with overdraft facilities. Maintain long-standing and
healthy arrangements with banks and other lenders. Don't apply
for a stack of credit cards, loans and so on, unless you're
absolutely sure it's the right product for you. It goes without
saying that you shouldn't apply for a credit line unless you use
it.
There's a sixth factor that can contribute enormously to a
negative credit rating. In 2001 it became possible for customers
to get their own credit score in exchange for a small fee. In the
past, prospective lenders were able to keep this score hidden,
and many unscrupulous institutions used this knowledge to charge
a higher APR on credit. By being aware of your credit score
lenders can't lie and say your score was low and charge higher
APR on your credit card.
More importantly, it's vital that you get rid of black marks
on your credit rating. Errors unfortunately happen all the time,
and erroneous reports of missed payments, referrals to debt
collectors and even bankruptcies can scupper your chances of
getting a low rate of interest and even a credit card altogether.
Query everything and haggle with credit reference agencies so
that only the information that is listed on your credit history
that should be there, is there.
You can find out your credit history by applying to one of
several companies. Many offer an online service and can furnish
you with the information both quickly and cheaply. Equifax,
Truecredit and Consumerinfo are some of the best such
providers.
Patience is the key to getting a great credit score - and the
best credit deals. You're never going to make the jump from
having a credit score of 500 to one of 700 overnight, but by
implementing easy to follow and practical strategies, you can
quite easily leverage your credit score to a rating that is
respected by all concerned.
Ethan Hunter is the author of many credit card related
articles. If you are looking for help with Credit Cards or any
type of credit issue please visit us at http://www.creditcardunlimited.com
MORE RESOURCES:
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