Does Negotiating APR Affect a Credit Score?
Various financial factors figure in to your credit score. Equifax, Experian and TransUnion credit reporting agencies list various account details for your credit cards, like the opening date, payment dates, credit limit, your highest balance and the current owed amount. Your annual percentage rate (APR) is not included in those records, but negotiating it may indirectly affect your credit score.
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Effects
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The federal Credit CARD Act makes banks tell you how it would take to pay off your credit cards accounts if you send no more than the minimum payment every month. High balances take years to pay off because much of the money gets applied to the interest. MyFICO, the website of the Fair Isaac credit scoring company, explains that high balances and the ratio of owed money compared to your credit lines affects your score. More of your money goes toward your balance if you get the APR lowered, which slowly but surely helps your score as your debt load drops.
Process
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Call your credit card issuer to negotiate your APR, Bankrate.com writer Lucy Lazarony advises. Be prepared with reasons the customer service agent should grant a decrease. For example, you are in a strong position if your account is several years old and has always been in good standing. Do an Internet search or save mailed offers from banks offering better rates to use for additional leverage. Request a supervisor if the first person does not agree to adjust your rate. Try again in several months if you are completely rejected.
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Considerations
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Closing your existing credit card account and transferring the balance to a bank that is offering a lower APR may be worth your while if you carry a balance and the new interest rate is significantly better. Your credit score takes a small hit when you close an account, according to Bankrate.com writer Leslie McFadden, but this is offset by the long-term debt reduction if the lowered interest helps you pay down the balance more rapidly.
Warning
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Your bank has a right to raise your APR, so the negotiated rate may not last very long. The Credit CARD Act requires 45 days notice prior to the increase, according to the board of governors of the Federal Reserve, and the new rate only applies to your new purchases. Stop using the card and focus on paying off the existing balance if the new rate is excessive and you cannot negotiate it back down. Avoid making late payments, as the law allows banks to boost the APR if you fall behind at least 60 days.
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