Card sharp - does card-jumping affect your credit rating?
Once that initial 0% interest period is over on your credit card, the APR kicks in and the charges start to mount up. Savvy credit card customers have been playing the credit card balance transfer game for some time now and taking advantage of a generous system. By transferring the outstanding balance to a new card with another 0% interest period, a clever customer can pay off an outstanding balance rather than seeing the monthly repayments vanishing in interest charges. But are the card companies waking up to this practice of card jumping, and can it adversely effect your credit rating?
Card jumping (as it's commonly referred to) is becoming a popular way of reducing interest payments to a minimum on outstanding credit card debt, but it can be detrimental to your credit rating. The misconception is that customers with large, interest-heavy debts on their cards are the most likely to have a poor credit rating. This is not necessarily true. Interest payments are the life-blood of lenders, so if their customers are paying on time and making interest payments, the lenders love them. Those who pay off their balance in full every month or make frequent credit card balance transfer jumps between cards are not profitable for the lenders. It may not seem fair, but what customers define as''good credit behaviour' and the lender's definition can be two very different things.
You can take much more control of your financial position by breaking through the mists of credit agencies and obtaining a copy of your credit report to see if card jumping has affected your rating. All three agencies in the UK will (for a small fee) send you a copy of your report so that you can see exactly what information is being held on you and, far more importantly, that it is accurate. The report will detail your financial history as well as other general information such as your address, occupation and income. If there's even one small mistake it can damage your chances of getting credit of any kind in the future. Frequent instances of card jumping could be one of the things that hold your finances back.
'Blanket applications' (applying to multiple credit cards to see if one lets you slip through the net) are unwise, as most credit card lenders have more than one product on the market. They will spot a multiple applicant a mile off and a cluster of rejections on your record doesn't do anything to improve your credit rating. The 0% lenders are particularly aware of this practice, and although they offer the opportunity to transfer a balance from one card to another openly, they are still cautious of anyone with 'Black data' included on their record, such as frequent card jumping or blanket application techniques. How you operate financially leaves a clear trail that lenders can easily follow, especially as those same lenders are tightening their criteria in the current economic climate.
It is generally agreed that the best policy with 0% deals is to look for one that offers a long introductory period. This stops you from having to move your outstanding balance to another card every six months or so, thus reducing the chances of being labelled by lenders as a card jumper. There are offers ranging from nine to 16 months available, but read the small print as the longer offers may incur higher credit card balance transfer charges. By moving to a card with a longer 0% interest period, you can build up your reputation for customer loyalty, improving your credit rating in the process. It also gives you the opportunity to pay off a larger amount of the outstanding balance at 0% interest. If, at the end of the 0% period you transfer to a new card, the credit card balance transfer will be smaller and have more chance of being accepted by a new lender.
Juggling your finances to take advantage of 0% transfer offers between credit cards is a difficult (but not impossible) balancing act of reducing your costs whilst maintaining a good credit rating. If you abuse the system, it will catch up with you in the form of a poor credit rating and rejection letters. But if you use the system carefully and sensibly, you can benefit by cutting your payments and your debt considerably. There are plenty of very good offers for credit card balance transfers to 0% cards available. Check the comparison sites, as these offers are updated regularly with that latest offers.
Card jumping (as it's commonly referred to) is becoming a popular way of reducing interest payments to a minimum on outstanding credit card debt, but it can be detrimental to your credit rating. The misconception is that customers with large, interest-heavy debts on their cards are the most likely to have a poor credit rating. This is not necessarily true. Interest payments are the life-blood of lenders, so if their customers are paying on time and making interest payments, the lenders love them. Those who pay off their balance in full every month or make frequent credit card balance transfer jumps between cards are not profitable for the lenders. It may not seem fair, but what customers define as''good credit behaviour' and the lender's definition can be two very different things.
You can take much more control of your financial position by breaking through the mists of credit agencies and obtaining a copy of your credit report to see if card jumping has affected your rating. All three agencies in the UK will (for a small fee) send you a copy of your report so that you can see exactly what information is being held on you and, far more importantly, that it is accurate. The report will detail your financial history as well as other general information such as your address, occupation and income. If there's even one small mistake it can damage your chances of getting credit of any kind in the future. Frequent instances of card jumping could be one of the things that hold your finances back.
'Blanket applications' (applying to multiple credit cards to see if one lets you slip through the net) are unwise, as most credit card lenders have more than one product on the market. They will spot a multiple applicant a mile off and a cluster of rejections on your record doesn't do anything to improve your credit rating. The 0% lenders are particularly aware of this practice, and although they offer the opportunity to transfer a balance from one card to another openly, they are still cautious of anyone with 'Black data' included on their record, such as frequent card jumping or blanket application techniques. How you operate financially leaves a clear trail that lenders can easily follow, especially as those same lenders are tightening their criteria in the current economic climate.
It is generally agreed that the best policy with 0% deals is to look for one that offers a long introductory period. This stops you from having to move your outstanding balance to another card every six months or so, thus reducing the chances of being labelled by lenders as a card jumper. There are offers ranging from nine to 16 months available, but read the small print as the longer offers may incur higher credit card balance transfer charges. By moving to a card with a longer 0% interest period, you can build up your reputation for customer loyalty, improving your credit rating in the process. It also gives you the opportunity to pay off a larger amount of the outstanding balance at 0% interest. If, at the end of the 0% period you transfer to a new card, the credit card balance transfer will be smaller and have more chance of being accepted by a new lender.
Juggling your finances to take advantage of 0% transfer offers between credit cards is a difficult (but not impossible) balancing act of reducing your costs whilst maintaining a good credit rating. If you abuse the system, it will catch up with you in the form of a poor credit rating and rejection letters. But if you use the system carefully and sensibly, you can benefit by cutting your payments and your debt considerably. There are plenty of very good offers for credit card balance transfers to 0% cards available. Check the comparison sites, as these offers are updated regularly with that latest offers.
About the Author:
As a financial writer Paul Dury enjoys breaking down the jargon and provide consumers with a clear view of the financial options available. If you would like to learn more about a credit card balance transfer you can read more here.
posted by Debt Consolidation Loan at
11:17 AM
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