Getting More From Credit Card Companies — Here’s How To Do It

The United States is one of the world’s most weighed-down countries in terms of consumer debt. Recent statistics indicate that, as of March 2019, the aggregate sum of United States citizens’ outstanding consumer debt was just over four trillion dollars — $4.052 trillion, to be exact.

Of this massive amount of American consumer debt, credit cards were responsible for some $1.057 trillion in outstanding debt. Right now — or at least as of March 2019 — credit card debt makes up roughly one-fourth of all outstanding consumer debt. 11 years ago, in 2008, credit card debt made up some 38 percent of the total amount of outstanding consumer debt collectively held by Americans.

If you’ve made it this far, it’s clear that you are interested in becoming more attractive in the eyes of credit card issuers. Here are a few ways to make credit card issuers fight over you as a customer — also included are several important things about credit cards that you might not have known.

Do you know what a credit score is?

You’ve almost certainly heard of the term “credit score” before, but do you really know what factors into credit score calculations? Probably not. Fortunately for you, however, here is how credit score calculations work.

In the United States, virtually all credit scores are calculated via the FICO model, which was created back in 1989 by Fair, Isaac, and Company. Here are the five general factors that are used to determine credit scores, per the FICO model:

• Payment history makes up 35 percent of your FICO score. Things like previous bankruptcies, charge-offs, vehicle repossessions, and late payments factor into this category, which is the heaviest of all the five factors.
• Debt burden consists of things like your credit cards’ current debt-to-borrowing-limit proportions, the number of accounts you own that have outstanding balances, and how much you’ve shelled out for down payments on previous loans. This category is second-most important, making up 30 percent of your FICO score.
• The longer your credit history is, the better off you are. Length of credit history makes up 15 percent of your credit score calculation per the FICO method.
• If you’ve proven that you can safely, readily, securely handle a variety of different types of debt, your credit score will thank you. Types of credit used makes up 10 percent of consumers’ FICO scores.
• The more you’ve reached out to lenders in hopes of borrowing money, especially how often you’ve done it recently, the lower your credit score will be. This last factor, the presence of hard credit pulls, also contributes to one-tenth of your FICO score.

Now that you know how credit scores are calculated — you’ve got a general, broad sense of what credit scores are, at least — it’s time to learn a few tips, tricks, techniques, and strategies that you can use to become more attractive in the judging eyes of credit card companies.

Start earning more money and have a means of proving it

People who are self-employed often have a difficult time proving their income to credit card companies. Because most self-employed individuals who apply for credit cards effectively are viewed as having no current source of income, they’re typically awarded ultra-high interest rates, low borrowing ceilings, and otherwise poor financing terms.

If you’re self-employed right now and your line-of-credit lenders don’t recognize all the revenue you pull in, try to work out new ways of getting paid. One such way to prove your income is to use a mobile credit card payment processing app such as Square to accept customers’ payments. Credit card receipts are universally accepted by credit card companies as proof of income, whether you’re self-employed or not.

Although it’s not recommended to change your career just to impress lenders, you could start working for a business, government agency, or organization that provides you with pay stubs that are readily accepted as proof of income by lenders.

Get in tune with your credit utilization ratio

Virtually every credit card has an upper limit that you aren’t allowed to exceed. Your suitability as a potential borrower is gauged — at least in part — by your current credit utilization ratios.

Credit card issuers look at each one of your individual credit cards’ credit utilization ratios, as well as your overall credit utilization ratio.

The ideal credit utilization ratio is 30 percent — no higher, no lower. This level shows lenders that you’re responsible, though you consistently use your credit cards to pay for everyday expenses as opposed to with cash or debit cards.

Keep in mind that the overall debt-to-borrowing-limit ratio isn’t as nearly as important as each card’s credit utilization ratio. As such, make a habit out of getting each of your credit cards’ outstanding balances to three-tenths — or 30 percent — of their borrowing limits.

Another ratio you should keep an eye on is the debt-to-income ratio

Wells Fargo, one of the largest financial institutions in the United States, reports that prospective borrowers’ debt-to-income ratios are most attractive to lenders when they’re below 35 percent.

To calculate your debt-to-income ratio, which is also known as a DTI ratio, first, find out how much money you owe to all creditors — not just on credit cards. Next, reasonably, fairly determine your annual income. If you still work the same number of hours, assuming you get paid by the hour like most people, and get paid the same dollar amount per hour as you did last year, find last year’s tax return and make note of your annual income.

Divide your total outstanding debt by your annual income — calculating your debt-to-income ratio is that easy. Any ratios above 35 percent usually reflect negatively on you in the eyes of credit card issuers. Working this ratio down is a great way to have credit card companies offer you more attractive deals on lines of credit.

Long-standing, reliable customers are often granted help that others aren’t

Although this strategy won’t work with every credit card issuer, credit card companies generally are good at working with their best customers.

If you’ve been a customer of a credit card company for at least a full year, during which you’ve always paid your balances on time and haven’t asked for favors, you can reasonably expect to have your maximum card balance increased, your interest rate lowered, or be given one or more perks that only trusted customers receive.

This technique is more likely to work if you have a credit utilization ratio of less than 30 percent and have consistently maintained that margin throughout your history with the credit card company, recently started making more money, and consistently pay off substantial chunks of outstanding debt as opposed to paying nothing more than minimum monthly payments.

Have outstanding, overdue debts? Here’s how to deal with them

Far more people than you can think of have one or more long-overdue debts working against them on their credit reports and financial histories. These delinquent accounts, as they’re known in the world of personal finance and lending, weigh heavily against you when credit card companies determine whether to lend to you or not and, if so, what interest rates, maximum balance limits, and other financing terms you’ll receive.

Fortunately, you can get these delinquent accounts off your record without paying the full amount they ask for.

Lenders often factor delinquent accounts out to debt collectors at discounted rates. These debt collectors know that such accounts are already overdue, meaning there’s a good chance that they won’t get any money.

As such, you can negotiate with debt collectors to satisfy your delinquent accounts by paying just a fraction of what you owe.

At first, offer just one-third of what the total dollar value of the delinquent account’s balance is. Don’t be afraid to hang up the phone and refuse to pay. Being firm will help you settle delinquent accounts for as little money as possible.

Don’t ever pay more than 50 percent of delinquent accounts’ outstanding balances. Debt collectors, believe it or not, often purchase delinquent accounts for no more than 10 percent of their original outstanding balances. In most cases, debt collectors pay as little as four to seven percent of delinquent accounts’ dollar value.