Avoiding Annual Fees on New Credit Cards

Today, many consumers may be on the lookout for new credit cards as a result of the ones they have perhaps not carrying the most beneficial terms, but some might find that the cards they want come with annual fees or other terms that may not be wholly beneficial.

The reason for this is often that a prospective accountholder has a credit score which has been somewhat diminished as a result of missteps they've made in dealing with existing accounts, though that doesn't necessarily mean it's only their credit cards which have been mishandled. The way in which a borrower deals with all the various accounts in their name — such as credit cards, student loans, auto financing, mortgages, and so forth — will be used to determine their credit score, and even minor mistakes in handling payments, debts and other concerns can lead to one's score becoming significantly lowered.

Consumers with the best credit ratings also have access to credit cards and other accounts with the best possible terms. Lenders generally reserve the lowest interest rates and biggest rewards perks for these borrowers, and most will also allow the healthiest accountholders to avoid annual fees that might be required for those with lower ratings.

Getting the house in order
Because there are a number of factors to keep in mind when dealing with borrowing and trying to maintain a healthy credit score, it's best to know which will most significantly affect such a rating. For instance, the ability to avoid late payments alone makes up 35 percent of a person's rating by itself, and therefore all efforts should be made to make sure all bills are sent in on time and in full so as to avoid getting dinged. And for those who have made such a mistake in the past, all it might take to repair their damaged standing is making several consecutive months of on-time payments once again.

Another major concern, directly related to credit cards specifically, is what is known as "debt utilization ratio," and that essentially means the amount one owes versus the amount they're allowed to borrow given their current credit limits. In general, lenders like to see this debt level kept below 30 percent of borrowing limits for those who want this portion of their scores to be maxed out. And because these two factors alone are both the largest associated with determining a credit score and the easiest to remediate, taking special care to address them should be a point of concern for consumers who want access to credit cards and other lines of credit with the best possible terms.

The other factors that determine one's credit standing is the mix of account types they have (with more different accounts being considered a sign of a healthy and responsible borrower who can juggle numerous responsibilities), accounting for 10 percent of the credit score, and the length of credit history accounting for 15 percent, and the number of recent inquiries accounting for the final 10 percent. The longer one has their accounts, the better off they will be, and making fewer requests for new accounts will be seen as good because it indicates a borrower is not having any sort of cash flow problems or other financial problems.

What will the options be?
When on the lookout for a new credit card with fewer fees and lower interest rates, and after having taken the time to address the various issues that could be lowering one's credit rating, it's time for the borrower to consider what type of card they want. If they want a card that comes with no annual fee, that is almost certainly going to be available to them given the work they put in to repair credit ratings that might have taken a tumble in the last few years. Likewise, their improved ratings will likely also give them access to the best rewards accounts, which will typically carry some fees and slightly higher interest rates but also give borrowers access to rewards that can in turn outstrip the added cost. However, when opening any type of credit card account, one should keep their previous spending habits in mind and see what card will fit best with the way they've used their accounts in the past.

But before applying, consumers should also take the time to order copies of their credit reports to determine whether there are any unfair markings on the documents which may be having a significant negative impact on their overall credit rating. If any are discovered, it might be prudent to work with a credit repair law firm, which may be able to help put these markings to rights, and return them to where they deserve to be. That, in turn, can once again give them access to the best possible accounts.