Your interest rates are determined largely by your credit score and history at the time of applying for the loan. If you were in a rough spot when you applied for a credit card, car loan, mortgage, or even student loans, you may have been assigned a higher-than-average interest rate to correspond with the risk associated with your credit score.
But if you’ve been working hard to improve your credit and have successfully raised your score, is there anything you can do about those high interest rates you’re paying?
Fortunately, you can almost always find lower interest rates if your improved credit score qualifies you for them.
Shop around using your new credit
To know if you’re eligible for a lower rate or if your current rate is higher than average, you need to do some research. First, you need to know exactly what your credit score is so you can use it as leverage. Find out what the average interest rates for credit cards or other relevant loans, and give the companies a call to ask what interest rates they can offer you with your current credit score. Make some notes that you can use later, and compare it to your current interest rate and credit card/loan information to assess whether you can improve your situation or if you’re already getting the best deal for your situation.
Use that information to negotiate lower rates with your existing lenders
Remember, debt is a business. Credit card companies are in competition with each other because they make money off or your interest rates and payments. Keep that in mind when you call them because now you have some grounds for negotiation with your new credit score and better offers. Explain to them that it would be a hassle to switch cards or banks, but you can’t pass up the savings with the better interest rate. Ask what they can do for you to secure you a lower rate. They will usually be willing to lower your interest rate if your credit score has improved and your other offers are legitimate. However, if they don’t, just kindly thank them for their time and start deciding on a new card or loan.
Consider applying for a balance transfer card
If your current card provider is unable or unwilling to offer you a lower rate, consider applying for a new card with a 0% introductory period for balance transfers. Many cards offer this feature to attract new customers. Now that you have a better credit score and a better handle on your finances, transferring your balance to a card with a lower interest rate can save you hundreds or even thousands in interest costs. Make sure that you don’t just do this to extend or skip payments. This is only an options for those motivated to pay the balance as quickly as possible at the lowest possible interest rate.