There are few things better in the credit world than a generous bank offering you the ability to charge several thousand dollars worth of purchases and not pay any interest on them for as long as 18 months. But what if you’ve applied for one of these 0% balance transfer offers and gotten turned down?
You probably got dinged because your credit wasn’t good enough. That means you need to spend some time building up that credit score before trying again.
You need good credit to get a 0% balance transfer deal
Your credit score is based on the following: payment history (35%), amount owed (30%), length of credit history (15%), new credit (10%) and type of credit (10%). All of these factors are what determines the level of risk you present to a creditor. They have no idea who you are. They are taking a risk on you. All they have to go on is your credit history, and you have to prove you are a good credit risk.
- Pay off your balance in full each month. This is a big one. The zero-percenters want to know that you won’t take a free ride for 18 months and then default. Show them you pay for what you charge. The way you manage this is by never charging more than you know you can pay each month.
- Pay off your balance on time, every time. 35% of your credit score is based on payment history. Late payments are a big negative mark on your credit, so this task is critical. The zero-percenters want to know you aren’t a deadbeat that will lead them on for a year or more, so do whatever it takes to remind yourself of your card’s payment due date. Automated payments from your bank account is one method.
- Consider a secured card. You may have good credit, but if you get a secured card, you may demonstrate to those zero-percenters that you are good to your word and can pay off whatever you charge.
- But don’t overapply for credit. The more times your credit report is examined (“pulled”) by a creditor, the lower your score. So if you got dinged for that 0% offer, don’t start applying for other deals right away, except for that secured card, noted above.
- Check your credit score. Federal law requires that each of the three major credit bureaus provides you with a free credit report each year. Check in on your credit score at least twice a year, or even quarterly. It’s rewarding to see your credit score creep up as you behave responsibly.
- Pay off outstanding balances. The bureaus look at your credit utilization rate, or the ratio of how much debt you have drawn down to how much total credit is available to you. The smaller that number is, the better for your credit score.
- Boost your credit in other ways. Another approach is to get utility services, like gas or electric or cable TV. Credit bureaus consider your on-time, in-full payment of these services to be of value in risk management, because you receive services before you pay. But you must check to see if your utility company reports those payments. Most will, but only if you’re delinquent. You can also see if your landlord is a member of (or will consider joining) WilliamPaid. This service reports your rent payments to Experian RentBureau.
Next step: Once you’ve gotten your credit house in order, and established six months or so of better credit behavior, give that 0% offer another try.
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