Credit card companies have become more and more selective about who they approve for balance transfers during the past year and many consumers that would have been approved instantly are now getting denied. Many of these consumers very recently had scores in the low to mid 700′s, but suffered damage to their credit score by credit limit decreases or account closures forced by their credit card companies. Because of this, it is more important than ever to check your credit report (you can view free credit report offers here) before applying online.
Many people who have endured credit limit cuts and account closures have had dramatic reductions in their credit scores due to the heavy weighting of credit utilization ratios, also known as CUR. Credit utilization accounts for over 30% of a person’s credit score and is based on the amount of credit used as a percentage of available credit. For example, a person with a $3000 balance and a $10000 credit limit will see score improvements, since their CUR is 30%. However, if that person’s credit limits are cut to $5000, their CUR goes up to 60%. This can have a substantial impact on credit scores.
Because credit scores play a major role in the approval process of credit card companies, and getting denied for a balance transfer credit card can decrease an applicants attractiveness to other companies, getting a credit report and making sure your credit score is above 680 should be the first step in applying for a credit card. If it turns out that your credit score is below 680 by a few points, it may be possible to boost your score in a month or less by taking a few easy steps. Here are the easiest:
1.) Pay whatever you would normally pay your credit card before the due date. This will reduce the balance reported to the credit bureaus which could help your score by a few points.
2.) Reduce your credit utilization rate by making a double or triple payment. Using the example from above, paying an extra $505 on $3000 in credit card debt reduces credit utilization by 20%, and brings your total utilization rate just below 50%.
3.) If you have a credit card that you have used for a long time and have never missed a payment with, consider calling them and asking them for a small credit limit increase of $500 to $1000. This will increase your available credit, thus decreasing your credit utilization rate.
Hopefully, when you check your credit report you’ll find a score above 700. If not, taking appropriate action can boost your score in about a month and help you get better deals on balance transfer credit card, not to mention auto and home loans.
For additional information, please see the free credit report section of Smart Balance Transfers where you can compare offers from companies that offer access to free credit reports and free credit scores instantly online before applying for a balance transfer credit card.
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