A solid credit report and good credit score may help you qualify for cheaper credit card rates. Credit card companies, banks and other financial institutions often look at your credit report and score before offering a deal, according to Zillow.com, and rates can vary dramatically based on your credit standing.
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Keeping your credit report and scores at a healthy level may go a long way toward nabbing the best interest rates all around. It’s also never too late. If your credit standing is already damaged, you have ways you can repair it.
How a Good Credit Standing is Determined
A good credit standing involves a solid credit history and a high FICO score, Zillow explains. FICO stands for Fair Isaac & Co., the organization that assigns your credit score based on information from your credit reports. Because three credit-reporting bureaus keep tabs on your credit history, you end up with three different reports and three different FICO scores.
Your overall credit report is based on a several factors. The bureaus look at your ability to pay off bills on time, how much money you owe, and how long you have been obtaining credit from various institutions. They also check out any new lines of credit for which you may have applied and the different types of credit you use. In addition to credit cards, various types of credit may include student or car loans and a mortgage.
A good credit standing in your credit report can come from paying your bills in a timely manner, not being overwhelmed by debt and having a long and solid credit history from a number of different creditors.
Applying for too many new lines of credit simultaneously may be a red flag that you are about to spiral into debt.
Good Credit Scores
Your credit score is a number based on your credit report. Your credit scores can range from approximately 300 to 850. The higher the number, the better off you are.
A general breakdown of scores gives you an excellent credit rating if your score is 720 and higher, a good credit rating if you rank between 660 and 719 and fair credit if your score hits between 620 to 659. If your credit score lurks below 619, you may have some hefty damage repair in store before you qualify for cheaper credit card rates.
Other Ways to Lower Credit Card Rates
A poor credit report and score are not likely to net you the best credit card rates in the world, but you may still be able to lower your existing credit card rates with a balance transfer credit card. These credit cards entice new customers by offering low or 0% interest rates for moving your debt from you existing credit card.
Even those with low credit reports and scores may be able to transfer their balance at a new, lower rate, but there are several caveats that come with balance transfer credit cards, The Motley Fool website warns.
The extremely low interest rates may be for an introductory period only. That means they will be set to expire after a period noted in your credit card agreement and may leave you with in interest rate that is even higher than you previously had.
The low interest rate may also only apply to the debt you moved over to the new credit card, and not any new purchases or other credit card activity. That means if you use the card for purchases or cash advances, you may incur very steep interest rates that linger.
They are likely to linger because any money you use to pay off your overall bill will first go toward paying off your transferred debt. Until you pay off your transferred debt, the other charges may stay on your bill and accrue high rates.
Another thing to look out for with balance transfer credit cards are any fees that come with the credit card. Companies can charge a fee for transferring the debt, for instance, which is typically a percentage of the overall amount you are transferring.
Other possible credit card fees noted by the Federal Reserve include an application fee for filling out an application, a set-up fee for establishing an account and a membership fee just for having the credit card. You may also want to note any late payment fees and other penalty fees for failing to follow the rules of the agreement.
Another important factor to note is the possibility of paying no credit card interest whatsoever. This is usually possible if you keep your charges within your means and pay off your credit card bills in total and on time every month.
No lingering balances typically mean no interest can be charged, effectively erasing rather than simply lowering any interest payments
Check out low interest credit cards and others that may be easier to pay off and bolster your credit standing with our FREE credit card finder!