750: This Magic Number Will Set You Free
Your interest rates have soared. Your minimum payments have swelled to copious figures. Your rewards have been hacked down like rogue cornstalks in summer. It’s the straw that breaks the back of your tenuous relationship with your severely crippled credit card and now it’s time to move on. But before you free yourself from this toxic relationship, you need to carefully plan your escape and you need to make sure that you are eligible to migrate to greener pastures.
What’s your FICO Score?
The first step towards a better credit card is to figure out what you have to offer potential lenders. To do this, you need to know your FICO score. Although you get a free credit report through AnnualCreditReport.com once a year, your FICO score isn’t included. However, with a free trial from GoFreeCredit or SmartCredit, you can get a FICO score (instructions on how to cancel without paying a cent included). Go get it now (it takes less than 15 minutes).
So, what was your FICO score? If you are in the 660 range, you are deemed “acceptable” according to BankRate.com. 680 is better, 720 is even better, and above 750 is ideal. Of course, your score isn’t the be all and end all. Card companies will also consider delinquent payments and other adverse public records. If possible, clean up all the questionable items on your credit report and get your FICO score as high as possible.
Don’t Apply Willy-Nilly
When you’re shopping around for a new card, the last thing you want is to impact your score negatively with numerous hard pulls and rejected applications. To maximize your success while controlling the damage of rejection, carefully target which cards you apply for. There are hundreds, maybe even thousands, of choices available – but since you know your credit score, you’ll know which ones are best to apply for.
Comparing Cards
At sites like LowCards.com or CardRatings.com, you can find cards that are organized by the credit scores required to qualify. So, instead of merely advertising the cards as for students or businesspeople, they’ll tell you whether or not you have a fighting chance with a “good” or “acceptable.”
Good credit score? Look for cards that aren’t quite top of the line but offer perks and terms that fit your spending habits best. For example, if you don’t plan on carrying a balance, feel free to sacrifice a low interest rate in favor of excellent rewards. Or, if you are transferring your previous debt, look for a card with a low balance transfer APR And balance transfer fee.
Excellent credit score? If you’ve summitted that golden 750 FICO score, then you have the pick of the litter. Get a card that’s going to repay your spending habits with rewards and cash back. You likely won’t be carrying a balance, which explains your high credit score in the first place, so you can easily find a credit card that doesn’t come with the pitfalls of your current. But be sure to read the fine print – now that you know the tricks of the trade, it’s your job to sidestep them.
Low credit score? Shoot for starter cards, secured credit cards or other cards designed for those with bad credit. But more than likely, you’ll want to stick with your current card and try to better your situation or negotiate a better rate. With a score below 700, your chances of getting a better card are slim.
Credit Unions
As was discussed in an earlier MYC post on credit union credit cards, smaller credit unions may give you better deals than investor-owned banks. Of course, with the Credit CARD Act making big changes to lending laws, the big firms like Chase and Bank of America may be adopting more consumer-friendly models. But according to experts, credit unions have already been practicing borrower-friendly business – after all, it’s the borrowers that own and operate the credit unions. Credit unions are available to certain professionals, employee groups, government workers and regional associations. You can find a credit union at creditunion.coop.
Closing Your Old Account
Thanks to the CARD Act, your right to close your account in response to changes in terms or interest rates is protected by law. Along with the 45 days advance notice of the change, a credit card company must offer you the option to cancel your account. The account will not be considered default once you close it nor will you be responsible for paying back the full amount immediately. However, you will have to pay off the old balance within 5 years and with a minimum monthly payment that can be up to twice as much as your old rate.
Because the pace of bureaucracy is especially slow when leaving the fold, you’ll want to chase up on your cancellation request often. Begin by cancelling by phone and then follow it up with a written letter. Afterwards, get your credit report and make sure that the account has been reported as closed. If not, then call and write another letter until you are free from the chains of your old creditor.
If you are transferring your balance rather than paying it down, also doublecheck that everything works out. Both credit card companies will likely send you a letter saying the transfer has been initiated, but such transactions can take weeks and to actually go through. Don’t hesitate to contact both companies to confirm that the transfer is complete and you are no longer in debt.
How’s your card shopping going? Have you canceled a card since the CARD Act kicked in? Are you finding good deals, or have all the perks been taken off the table?
Photo by Dazzie_D
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