Nothing Wrong with Asking
To get the most out of your borrowing, you should ask your credit card companies to work with you. If you keep balances on your credit cards, the first thing you should ask for is a lower interest rate. By keeping a balance on your card, you are a profitable customer. The credit card company should be willing to work with you and give you a deal. To get a better rate, just call them up and ask.
Getting a Lower Rate
When you request a lower interest rate, let them know that you think you deserve a lower rate. If you have seen more attractive offers elsewhere, let them know. However, you probably won't make much ground by telling them specifically what offers you've seen. The customer-service representative on the other end of the line will simply try to overcome and rebut any arguments you make. State your case simply, tell them what you want, and ask them for a yes or no answer.
You should be polite, but firm when you ask for a lower interest rate. If you are thinking of leaving for a better deal, let them know. However, you will most likely talk with an entry-level employee who does not care about your business. If you don't make much progress, try again later or take your business elsewhere.
Getting a lower interest rate will be easier if you've been a cooperative borrower. In other words, you should ask for a deal only after you have made on-time payments for an extended period of time. If you have missed payments, they will consider you a risky borrower who they have no incentive to negotiate with. In addition, it will help you if you have a low balance on that credit card relative to the maximum credit limit. Again, you appear less risky, and there's always the potential that you'll increase your balance if they give you a deal.
Getting to No
Your credit card company may reject your request. However, don't be discouraged. A no simply means that they were not ready to make a deal when you talked with them. You can always call back in a few months, or you can take your business elsewhere. If you decide to do business with a company that is more willing to work with you, don't rush to close the accounts that denied your request. As you've learned elsewhere, it helps your credit to have old accounts with low balances. If a credit card company was unwilling to give you the deal you deserve, you can simply keep a small balance on your account and let it lie dormant.
Increasing Credit Limits
You can also ask your credit card company to increase your credit limit. This means that they will allow you to borrow more — but that's not why you would do it. Borrowing more would only mean that you have more debt to pay off in the future. Instead, you increase your credit limit so that you can increase your credit scores. By using a smaller percentage of your total available credit, you appear less risky to the credit-scoring models.
The “amounts owed” category accounts for 30 percent of your FICO credit score. In this category, the scoring models look at how much you owe relative to how much you are allowed to borrow. This category also accepts other factors, but increasing your credit limit is intended to make it look like you're borrowing less. If you keep your debt balances exactly the same, you will look better because you have more available credit.
This strategy can help even if you pay your balances off in full every month. Your credit card companies don't necessarily report that you pay your balances off every month, instead, they simply report your current balance on whatever day they happen to report to the credit-reporting companies. It is simply a snapshot in time. They might happen to report your balance the day before your check arrives to pay it off.
Your credit reports may show that you're maxing out your credit cards even if you pay your cards off in full each month. The credit card company simply takes a snapshot of your account and forwards that snapshot to the credit-reporting companies. If you use your card heavily and then pay it off each month you could be hurting your credit.
Having a higher available credit limit will help you show that you are not skating on thin ice. Another way to do this is to have a low balance on the days they report. If you can figure out when your lender reports your balance to the credit-reporting companies, you might want to pay down your balances a few days ahead of time.
Getting a credit card limit increase is easy. All you have to do is ask. You can pick up the phone, or you can even make your request online while you're logged in to your accounts.
