When working with people on credit issues and dealing with the complexities of a credit report score, one notices without question that the debt to credit ratio is important. The debt to credit ratio can have a huge effect on that important home or auto loan or that needed business loan. However when balanced correctly, in accordance with the set standards for good credit from the credit reporting agencies, the debt to credit ratio can provide the much needed improvement for your current credit score.
People are constantly commenting on what a good idea it is to make sure and pay off all of your cards every month in full to make sure to establish good credit and show that one can pay their bills. This is such a misconception and only leads to confusion. Having a revolving balance kept at the right percentage compared to your debt and you are on your way to a better credit report.
Learning about your debt to credit ratio can be one of the important steps to putting yourself in the right frame of mind for credit success. For most Americans the debt to credit ratio is to high and it can be hard to obtain any new offers or loans from banks or financial institutions. For example, you have resolving accounts totaling $10,000 but you currently owe $8,000 which gives you an eighty percent ratio, very high for a buyer of a finance deal to even take a second look at you.
Lenders make the bulk of their money through charging interest, not sending out pretty square cards or annual fees. When looking at any model designed for credit scoring, it likes you to maintain your balances and pay over a length of time and it is driven with your ability to do this, amongst other things.
Being a lender in an institution, if I could see that over a long period of time, you had been able to maintain long-term credit worthiness with a company, it would prompt me to want your business and “interest” as well. As a lender, I know the type of customer that I want to solicit my loans to.
Sub-prime Merchandise Cards can be a great way to balance your debt to credit ratio while still warranting that $350 purchase for that lamp you HAD to have at Macy’s. Sub-Prime Merchandise Cards are simply cards carrying a line of credit to buy merchandise from a specific merchant which in most cases turns out to be the company who originally sold you the card.
Some marketers, perhaps due to their obvious benefits to the consumer, have started to market these cards while misrepresenting and misunderstanding how they work in their advertising campaigns. Sub Prime Merchandise Cards report to one or more of the three credit reporting agencies and can help to even out your percentages quickly when it comes to debt to credit ratio.
By: Amy Pedersen
Posts Tagged ‘Period Of Time’
Credit Score Secrets Part 1 – Debt to Credit Ratios
April 23rd, 2010Balance Transfer For Fair Credit
April 7th, 2010
If you owe a balance on your credit card, or several credit cards, you may be able to get lower interest rates for a while that help you pay down your debt, thanks to cards that offer balance transfer for fair credit. Many credit cards offer great deals on balance transfers with low interest or no interest for a limited time, but it’s hard to find those great deals if you have made credit mistakes. Some cards, however, special in cards that offer balance transfer for fair credit.
Chances are your rate won’t be as low as it might have been if you had good credit, but as long as it’s lower than what you’re currently paying, you can make it work for you. While the idea of being able to convert those high-interest balances to a card that offers balance transfer for fair credit has its appeal, there are pitfalls you need to watch out for.
What will the interest rate be on the card that offers balance transfer for fair credit? Obviously it’s lower than your current rate or you wouldn’t even be considering it, but how much lower is it? When you figure in the extra you’ll pay in transfer fees (up to $75 per transfer) will you really be saving money?
Let’s say you’ve done the math and you will be saving money, even after transfer fees. Now you need to look at how long the introductory interest period is. You won’t get that lower interest rate forever–if you carefully read the agreement you’ll see exactly when it reverts to a “regular” interest rate. Is the time period of lower interest on the card a long enough period of time to make it worth the hassle?
If it is, then what will the interest rate be when that period runs out? Is it still lower than your current cards? You might be shocked at how quickly and how high the interest will go up on a card that offers balance transfer for fair credit, so be sure you have the facts before you sign up.
By: Jake Wilson
