Ask for one and you will get it – This has been the norm some years back. If you make a request for a cutback in the interest charged on your credit card loan, chances are you will be accommodated by your credit card company. In fact, in a study that was conducted by a consumer group back in 2002, results showed that 5 out of 10 requests for lower APR by credit card holders were approved with just a phone call. This is no longer the case. Due to the lingering financial crisis and difficulties in the subprime lending industry, particularly credit card debts and payday loans, lending institutions are now reluctant to accommodate such requests for lower APRs.
However, this doesn’t necessarily mean that lower APRs can no longer be given by lending companies. If you are seriously thinking of making such request then it is important that you do your homework and consider the risks associated to it.
So, what are the risks that you have to take into account if you make such requests for lower APRs?
Denial of your request for lower APR may not only be what you will get – instead of a lower APR, you may end up with a lower credit limit. Every time you discuss and negotiate the terms of your credit with your lender, your credit records are retrieved and subjected to a review. In which case, you may be asked to submit updated reports such as income tax returns and proof of income. Again, this will allow them to reassess your financial position and if they find information or data that may not satisfy any of the terms of your current loan arrangement then they may make the necessary adjustments such as lowering of your credit limit. This event will have a negative implication on your credit rating as this will be lead to a higher utilization ratio in your credit report.
So, what must you do before making the call? Before you decide on a lower APR, it is important that you are absolutely confident that you have strong financial fundamentals. For instance, you must have no default or late payments. You must not have maxed out your accounts nor have any pending credit application. It is also important that you have a credit score of at least 740 when you decide to request for a lower APR.
Finally, check your credit report first and make sure that there are no erroneous information. If you find any errors in the report, it is important that you first file a dispute with the credit bureau for the appropriate corrections before you make the request for lower APR with your lending company.
Tags: credit cards, lending companies, lower APR
