Many consumers are aware that not having a good credit score can be very costly, but do you know how much it can affect you and your wallet? A bad credit score can prevent you from being approved for credit cards, or allow an approval with less than favorable terms.
Meet our fictional characters Edward, Gregory and Andrew.
 |
Edward has an excellent credit score rating falling in the range of 720-850. Having an excellent credit score, Edward will qualify for some of the best offers and interest rates available. |
 |
Gregory has a good credit score rating falling in the range of 690-719. Having a good credit score, Gregory will qualify for lines of credit at decent interest rates. |
 |
Andrew has an average credit score rating falling in the range of 630-689. Andrew has been having some trouble with his finances and his credit score has consequently been affected. Andrew out of the three consumers, will qualify for lines of credit at less desirable interest rates since he is seen as a bigger risk. |
Credit Cards
When it comes to credit cards, your monthly payments may vary from month to month. This is due to how you are managing your balances. In a real case scenario, your balance would fluctuate month to month, depending on the amount of purchases and payments you make to the account. For this scenario, our friends Edward, Gregory and Andrew will be carrying a balance of $3000 that will be subject to interest rate charges.
$3,000 Credit Card Balance
|
Credit Score Range |
Interest Rate (APR) |
Interest Charged Yearly* |
|
| Edward |
Excellent 720-850 |
10.9% |
$327 |
| Gregory |
Good 690-719 |
19.8% |
$594 |
| Andrew |
Average 630-689 |
22.99% |
$689 |
*(Example scenario if a $3000 balance is carried throughout the year)
In a real life scenario, Edward may actually qualify for an offer of 0% interest for at least a year or more. Edward could also be offered great opportunities for balance transfer cards to help lower his debt to limit ratios.
Don’t Limit Your Options
When you have a lower credit score, your options are limited when it comes to credit card options. With this credit score range, the most you may be able to qualify for are secured credit cards. This may turn off consumers since these types of credit cards require a deposit to be put down to be approved for the line of credit. These deposits can range anywhere from a $200-$300 minimum deposit, and interest rate terms may be less than favorable. On a positive note, these secured cards can help build your credit, as long as you verify that the card reports to all three bureaus. Secured credit cards can be a stepping stone to being approved for limit increases without additional deposits, or the ability to qualify for a line of credit with better terms after building some credit with a secured credit card.
Higher credit score ranges allow for unlimited credit card options, including more favorable terms, or availability of credit card perks.
Some of these credit card perk options include:
- Flyer miles- Gives you the chance to earn flyer miles when you use these types of reward credit cards. Your points can be redeemed for flights.
- Cash back- Gives you the chance to earn money when you use these types of reward credit cards. The amount of cash back you get is usually a percentage of the value of your purchase.
- Reward points- Gives you the chance to earn points when buying gas, groceries or other merchandise. Special promotions may be advertised for additional point earnings, such as double points for shopping at a specific retailer. These points can be accumulated and can be redeemed with participating retailers.
- All of the above- Some credit cards may give you various options in how you can cash in your rewards and points, allowing flexibility.
Where does your credit score stand? Do you have an open and active credit card reporting on your credit report? Ensure that you have at least one line of revolving credit (credit card) reporting to all three bureaus to assist you in rebuilding and optimizing your credit score. Not sure if you need a revolving credit line? Contact MSI Credit Solutions. We can provide you with a free, no obligation credit consultation to determine your needs and guide you along the credit restoration process.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
*The information in this article has been provided strictly for educational purposes.
