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Ask Dr. Don

Getting a lower interest rate

Dear Dr. Don,
I had poor credit many years ago due to divorce. I lived for many years without any credit cards.

Five years ago I was able to get a credit card with a rate of 19.7 percent. Since then I've gotten five more cards with interest rates from 14 percent to 16 percent. I have a good payment history. I would like to try to combine my credit cards to maybe two lower-rate cards, but where do I start?

Thank you for any advice!
Carrie Credit

Dear Carrie,
Since negative information stays on your credit report for seven years, you should be well on your way to rebuilding your credit history. You can find the current averages for credit card rates on Bankrate's Credit Card Channel. My point is that the interest rates on your current credit cards aren't awful, so don't concentrate on chasing lower interest rates.

Closing out your current cards to consolidate balances on new cards may not be in your best interest because it can lower your credit score. According to MyFICO.com, "... consumers with longer credit histories have better repayment risk than those with shorter credit histories."

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That site also suggests that, "Avoiding a sudden ramp-up of new credit openings will help you continue receiving positive points for this area of consideration by the FICO score."

Talk with your current card companies about increasing your credit limits and lowering your interest rates. Move balances from your higher interest cards to lower interest cards, either with a balance transfer or by how you manage your credit card use and payments.

Congratulations on turning your credit history around.

-- Posted: Aug. 15, 2002

Read more Dr. Don columns
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