The following is a guest post by Tisha Tolar. Special thanks to Tisha for filling in while I’m on vacation.
As the economy continues to remain unstable, it seems for many that all four walls are starting to crumble. Facing more struggles paying bills, worries about job loss, and even concerns about day to day survival are now topics familiar to the average family. While there are still plenty of people who manage okay and are able to maintain a good credit rating, it still may not be good enough anymore to just be “good”.
In the days of old, credit cards used to be relatively easy to apply for and obtain. Now, the application process of a new credit card is much less guaranteed. For many reasons, namely risk on behalf of the credit card companies, a consumer must prove beyond a reasonable doubt that they are credit worthy. This is also true in the many other lender industries, including mortgages. A few years ago, 720 was considered to be an excellent credit score. At this point, lenders want to verify a 740 or better before they may be willing to grant you a line of credit.
In addition to your credit score and solid history of paying your bills on time, ALL of your bills, a lender may also take into strong consideration the type of work you do, as listed on your application. If you are working in an industry such as mortgage brokering, which is currently standing on shaky ground, your lender may not be so quick to give approval. Not many consumers may consider that lenders even looked at the information listed on a credit card applications much beyond the pulling of the credit reports.
You probably can’t change your job just to get a credit card but there are other things you can do to ensure credit card companies and other lenders see fit to approve your application for credit. Here is a reminder list to keep you in good standing and credit worthy, even during the current credit crisis.
- Analyze Your Current Credit Worthiness
If you are contemplating a switch to a new credit card company to avoid increased interest rates or to consolidate card balances, make sure you first have the most accurate information on your credit report before starting any application. Order your credit reports with score and seek out any mistakes. If you find incorrect information, follow procedure to resolve the issues.
Continue On-Time/More-Than-the-Minimum Payments Each Month
Even if you struggle, make it a priority to pay your credit card balances each month until you can consolidate and transfer balances onto one card. If you fail to make an on-time payment or miss a payment entirely, your lender will likely jack up your interest rate immediately, leaving you drowning in even more debt. As for minimum payments, forget them. Always tack on at least $10 extra each month to pay down the balance.
- Be Wary of Account Closures
Some card companies will close your cards for inactivity. You have to be careful with this situation, as too many closed accounts can negatively affect your credit score. Closed accounts will decrease your debt-to-credit ratio which will drop points in your credit rating.
Read and Understand Credit Card Changes
Credit card lenders are changing the rules. They are raising interest rates, even when you technically don’t do anything wrong. For example, your card’s interest rate can go up just because you paid another one of your bills late. In addition to raised interest rates, your credit card company may also choose to lower your limit of credit. Imagine that scenario happening without your knowledge and you end up charging purchases that put you over the limit. Now you are stuck with the additional fees for going over the limit. Read every piece of mail coming from your credit company. Don’t assume your account will not change from month to month.
- Deal Straight with the Lender
If you have been a good customer, chances are good the credit card lender will not want to lose your business. If you are considering a new card to transfer balances, call your current company first and let them know your intentions and what has made you unsatisfied. There is no guarantee the lender will help you out but as a good customer, they will likely work hard to retain your business, as good customers are getting harder to come by.
Tisha Tolar is a freelance writer providing content for CreditCardAssist.com, where she regularly writes about credit cards, rewards programs and general consumer finance issues.