Of course, using credit cards wisely comes with a number of benefits. In addition to being a secure and convenient way to make payments, credit cards can help you establish and build credit, give you access to valuable rewards, and can even help improve your scores. To help you play the credit card game wisely, here are 5 smart moves to make.
1. Ask for a credit limit increase
Your issuer might occasionally surprise you with an unprompted credit limit increase, but it never hurts to take matters into your own hands if you’ve been pining for a higher credit line. A limit increase instantly improves your credit utilization ratio (otherwise known as “debt-to-limit” ratio)—which factors into your FICO Scores—so taking the proactive route toward bumping up your limit can be worth the effort.
First, evaluate your recent payment history and current debt-to-limit ratio. You want to make sure you’ve been making payments on time and that you’re not inching dangerously close to your debt ceiling. Next, give your credit card issuer a call and simply ask for a limit increase. Be polite but persuasive. Point to your solid payment history, your excellent FICO Scores, your responsible credit management—any financial information that presents yourself as a good candidate for receiving a limit increase.
2. Monitor your credit limit
Credit card companies are required to give you 45-days’ notice before making any significant changes to your account’s terms—not so for lowering your credit limit. A surprise limit reduction can impact your FICO Scores by throwing off your carefully-maintained credit utilization ratio, so it’s a good idea to keep an eye on your credit limit and avoid being blindsided by a sudden decrease.
Credit utilization once again comes into play here. A $1,000 balance on an account with a $4,000 credit line (25% utilization) can take an unexpected turn for the worse if an issuer lowers the limit to, say, $3,000. Now that pretty-good 25% utilization ratio is hovering above the 30% line many credit experts say you should keep your utilization under. By checking in on your credit limit from time to time, you can take action and pay down a larger portion of your balance to maintain your utilization ratio in the face of a credit line reduction.
3. Set up automatic payments
Payment history makes up 35% of your FICO Scores, so making sure you pay on time, every time, is crucial. FICO Scores consider recent payment patterns more heavily than past credit mistakes, but late or missed payments can stay on your credit reports for up to 7 years. That’s a mighty long time to be carrying around a payment that slipped your mind once.
Keeping payment due dates straight can feel like tracking the phases of the moon throughout the month—especially if you have multiple credit accounts—so the easiest way to make sure you’re staying on top of payments is to automate them. You can set up automatic payments to take care of the minimum due each month, just so your credit doesn’t get dinged by a missed payment, and take a more hands-on approach for paying down the rest of your balance. And while you’re at it, you can set up email or text notifications to verify your payments are being made every month.
4. Transfer your credit card balance onto a low- or 0%-APR card
Using a balance transfer card is a great option if you’re looking to pay down debt while paying little or no interest, but did you know that it might also give a little boost to your FICO Scores? How? Thanks to our trusty old pal: credit utilization.
It’s not uncommon for a credit user struggling to pay down their balances to be using up a large chunk of their available balance. Remember, credit utilization factors into your FICO Scores, so the more of your available balance you use, the bigger the impact it could be having on your scores. That’s why opening up a new account that can shoulder part of your debt burden is a doubly smart credit move—you’ll have a little breathing room to pay down your existing balances and some more available credit as an added bonus.
5. Ask for reconsideration after getting declined
Nobody likes getting declined for a credit card application, but you don’t necessarily have to take no for an answer—at least not right away. There’s a good chance your initial rejection was decided by a computer (it’s why your application can sometimes be instantly approved or denied). If you feel like your denial is unwarranted, it doesn’t hurt to rebel against our machine overlords and ask a real person to reconsider your application over the phone.
The same rules apply here as they do for requesting a credit limit increase. Let the person you’re speaking with understand why you think you deserved to be approved. The computer that denied your application might not have access to important details about your finances. The worst that can happen is that you’re rejected twice, which might sting a little but definitely not as much as losing out on the opportunity to reverse a computer program’s decision.
We at Professional Credit Restoration, LLC have extensive experience working with the credit score matrix. We help individuals improve their credit profile and eliminate errors found on most credit reports. Contact either Jay or Patrick for more information or assistance.
We hope that this article has helped you identiry potential credit concerns before they develop into serious problems.
Jay Gegenberg and Patrick Purcell