Shuffling the deck - can card jumping be bad for 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 can affect your credit rating. It's a common misconception that those who build up a debt on their credit card and pay high APR are the ones that are most likely to be rejected for future credit or have a poor credit rating. The truth is that the card companies love these customers, as the interest they pay keeps the credit card lenders in business. It's the ones who attempt to beat the lenders at their own game by repeatedly taking advantage of 0% offers time and again that are at higher risk of ending up with a lower credit rating and a handful of potentially damaging rejections, lessening their chances of obtaining any kind of credit.
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.
Many credit card lenders have multiple outlets so 'blanket' application (applying to several credit cards at the same time in the hope that one of them accepts your application) is inadvisable, as it will be spotted straight away by the lender. A cluster of rejections can lead to 'Black data' being added to your credit rating, lessening your chances of obtaining credit in the future. Credit ratings are affected by many forces, both the mundane such as address and occupation, and the more complex, such as how you manage your money. How you conduct your financial affairs leaves a paper trail that is easily traced by credit companies who, in the current economic climate, are tightening their criteria for lending.
If you are looking to transfer the balance of one card onto a 0% offer, the best policy is to look for a card that has a long 0% introductory period so that you are not attempting to transfer balances every six months or so. Short-term credit card balance transfers catch the eyes of the lenders and are signs of customer disloyalty, something lenders are loath to promote for obvious reasons. Some cards offer an introductory 0% period of up to 16 months. By moving your balance onto one of these cards you can stay with the same provider for a longer period of time, therefore drawing less attention to yourself by card-hopping too frequently and building up your reputation as a loyal customer. It also gives you a greater opportunity to pay off a larger amount of the balance at 0% interest. If you haven't paid off the debt completely by the time the offer runs out, the amount that you will be looking to transfer will at least be considerably reduced. Again, this gives you a greater chance of being accepted by the next card you choose to move to.
Lenders don't exactly frown upon card jumping - after all, they're the ones offering the opportunity to make the move. But they are looking for new, long-term customers, not short-term hoppers who take advantage of the 0% offers for a few, brief months and then move on. Most financial experts agree that by playing it smart you can maintain a balancing act of reducing your initial debt, paying little or no interest and keep your good name amongst lenders. It can help you to manage your finances much more successfully as long as you remember the golden rules - the general thought is don't use the balance transfer card for anything else except paying off an outstanding debt and don't card jump too often.
Card jumping can affect your credit rating. It's a common misconception that those who build up a debt on their credit card and pay high APR are the ones that are most likely to be rejected for future credit or have a poor credit rating. The truth is that the card companies love these customers, as the interest they pay keeps the credit card lenders in business. It's the ones who attempt to beat the lenders at their own game by repeatedly taking advantage of 0% offers time and again that are at higher risk of ending up with a lower credit rating and a handful of potentially damaging rejections, lessening their chances of obtaining any kind of credit.
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.
Many credit card lenders have multiple outlets so 'blanket' application (applying to several credit cards at the same time in the hope that one of them accepts your application) is inadvisable, as it will be spotted straight away by the lender. A cluster of rejections can lead to 'Black data' being added to your credit rating, lessening your chances of obtaining credit in the future. Credit ratings are affected by many forces, both the mundane such as address and occupation, and the more complex, such as how you manage your money. How you conduct your financial affairs leaves a paper trail that is easily traced by credit companies who, in the current economic climate, are tightening their criteria for lending.
If you are looking to transfer the balance of one card onto a 0% offer, the best policy is to look for a card that has a long 0% introductory period so that you are not attempting to transfer balances every six months or so. Short-term credit card balance transfers catch the eyes of the lenders and are signs of customer disloyalty, something lenders are loath to promote for obvious reasons. Some cards offer an introductory 0% period of up to 16 months. By moving your balance onto one of these cards you can stay with the same provider for a longer period of time, therefore drawing less attention to yourself by card-hopping too frequently and building up your reputation as a loyal customer. It also gives you a greater opportunity to pay off a larger amount of the balance at 0% interest. If you haven't paid off the debt completely by the time the offer runs out, the amount that you will be looking to transfer will at least be considerably reduced. Again, this gives you a greater chance of being accepted by the next card you choose to move to.
Lenders don't exactly frown upon card jumping - after all, they're the ones offering the opportunity to make the move. But they are looking for new, long-term customers, not short-term hoppers who take advantage of the 0% offers for a few, brief months and then move on. Most financial experts agree that by playing it smart you can maintain a balancing act of reducing your initial debt, paying little or no interest and keep your good name amongst lenders. It can help you to manage your finances much more successfully as long as you remember the golden rules - the general thought is don't use the balance transfer card for anything else except paying off an outstanding debt and don't card jump too often.
About the Author:
Paul Dury is a financial expert who writes articles for various financial-based websites. If you would like to learn more about a credit card balance transfer you can read more here.
posted by Credit Counseling at
10:49 AM
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