There’s a very happy lady in Vernon now. A couple of months ago she applied for a $20,000 line of credit. She was approved, but at a rate of prime plus three percent. She was smart enough to take a time-out and tell them she’d think about it. She was right not to sign up. The rate should have been prime, or prime plus one at worst. When she emailed me, it was really easy to see why her rate was this high.

She has a credit card with a limit of $8,000 and a balance of $5,000. When the balance is more than 50% of the limit, it plummets a credit score. Since the rate on her credit line is only based on that score, she was told prime plus three.

The fix was easy, too. To get a little better rate, she just had to pay down her credit card below 50% of the limit, so a payment of $1,100 to get there. To get a boost on her credit score, the balance versus limit has to be below 30%.

There were two ways to accomplish that: I had her call her card issuer to increase her limit. She did that, and had it raised to $10,000. A higher limit meant her balance versus limit dropped automatically. Now it was $5,000 owing versus $10,000 limit less her $1,100 payment. Now she just had to make another $600 payment to get her card balance to less than 30% of her limit.

She waited 45 days to get it through her credit report and went back to her financial institution. Presto! They re-did her credit report and just like that, she was re-approved at a rate of prime. Since the average person owes on their line of credit for 14 plus years, that was a saving of $600 a year times 14 years, or $8,400. Not bad for one little detour!

Don’t just roll your eyes, complain, and think there’s nothing you can do. Just don’t sign up on the spot. You don’t walk into Walmart and pay double for something, do you? Why would your borrowing rate be any different?

And if you already have a line of credit that’s over prime, the same thing applies. Some lenders check your credit score once a year and adjust your rate – others just do it once. If you’re line of credit rate went up, don’t just shrug your shoulders. Go ask how many points your credit score has to move up! Then get your credit card balances below 50% if they’re not – below 30% if you can and ask them to re-calculate your rate or get another lender!