FDIC Consumer News
How to Get Your Best Deal on a Loan or Credit Card? Plan Ahead.
Many consumers think they cannot influence whether a loan or credit card application will be approved or what interest rate they'll get. But the reality is that prospective borrowers can take certain steps before filling out an application that may increase their chances of getting an approval, with a favorable interest rate and attractive account terms. Here are suggestions from FDIC Consumer News.
Consider simple ways to improve your credit scores. As we have often said, paying your bills and loans on time and owing as little as possible on your credit card(s) compared to the credit limits are two of the most important things you can do to boost your scores and get a better deal on a lending product.
Also think twice before closing older credit card accounts or lines of credit. "Don't immediately believe that you have to close an old account because of its age or because you're no longer using it," said Susan Boenau, Chief of the FDIC's Consumer Affairs Section. "Lenders making credit decisions like to see an established history of credit use, and the length of your credit history is figured into your credit score. So in general, the longer you can show you've been using credit the better." Striking the right balance is key, so when in doubt, a reputable credit counseling service can help. For guidance on finding one, go to the Federal Trade Commission's website.
Check your credit reports for accuracy. A credit report is a compilation of how you have been paying your credit card bills, loans and selected other debts. By law, you are entitled to at least one free copy of your report from each of the nationwide credit bureaus every 12 months. To order your free credit report from the three major credit bureaus (Experian, Equifax and TransUnion), visit www.AnnualCreditReport.com or call toll-free 1-877-322-8228.
It's important to go through your reports carefully to identify errors, such as loan or credit card accounts in your name that you did not authorize (and are likely to be fraudulent) or incorrect payment histories or account balances. Some mistakes can significantly lower your credit scores, which lenders often use in deciding on loan applications and interest rates.
"It's best to order copies of your credit report from each of the three main credit bureaus because an error that appears on one report might not appear on another," said Heather St. Germain, a Senior Consumer Affairs Specialist at the FDIC. "That way, if the bank you eventually apply to only uses one of your three reports, and it's one with an error, you'll have an opportunity to get that corrected before you apply."
If you do find an error on your free annual credit report from a credit bureau, contact the company to dispute the information. Once a credit bureau receives your complaint, it has 45 days to finish its investigation. Generally, consumers can file disputes with the credit bureau online, by phone or through the mail. A credit counseling service can help here, too. You may also contact the creditor directly because it can provide updated or corrected information to the credit bureau at your request.
Sometimes consumers have difficulty ensuring that erroneous information is corrected or removed from their credit reports. If you've tried to resolve the issue on your own without success, you can turn to the appropriate federal regulator for help.
If the problem is with a bank and you're not sure which federal regulator to contact (remember that the FDIC is not the primary regulator for all of the institutions it insures), you can call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342) or use an online directory of insured banks at http://research.fdic.gov/bankfind. (For general information about resolving a complaint involving a bank, see our article in the Spring 2012 FDIC Consumer News. For help with a problem involving a credit bureau or a nonbank creditor (such as a finance company or a retail store), you can submit a complaint to the Consumer Financial Protection Bureau.
Shop around. Before submitting an application, it's important to get the best deal you can by researching the terms and conditions of different loans and credit cards offered by your bank and a few competitors. Think about the type of loan you need (for example, a fixed– or an adjustable–rate loan) and be realistic about what you can afford. Know the fees that may be assessed and what would trigger them.
Keep in mind that a loan or credit card may seem like a good deal on the surface, but a closer look at the fine print may reveal that it is not the best option for you. One of the most important things to remember: Be clear on whether an attractive interest rate being advertised is locked in or if it's an introductory offer that may increase in the future.
Also be aware that when you apply for a loan or a credit card a record of that "inquiry" will show up on your credit report. "Because too many inquires may hurt your credit score, it's best to only submit applications for credit products that you think will meet your needs," said St. Germain.
For additional guidance on how to shop for a loan of any kind or a credit card, search back issues of FDIC Consumer News.