One of our readers, Marge, sent us this question:

I bought a house for an investment (paid $19,000 on a house that was appraised at $74,000) thinking I would fix it up and then resell it. I used a home equity loan (8%) and a credit card (14%) to buy the investment house, pay off some debt and fix up the house.

Since the housing market is horrible right now, I am just renting out the house until I can sell it. So, I have $40,000 debt on the home equity loan and about $20,000 debt on the credit card. I am not late on any payments, but called the credit card company to see if I could negotiate the interest rate.

I was told that interest rates are only renegotiated through the collection department and usually when accounts are past due. Do you have any suggestions? I was going to go back to the bank and up my home equity loan to pay off the credit card - but the way things are now I doubt the bank will do that.

Thanks,
Marge

Thanks for your questions Marge! I definitely think we can help here.

Step One:

Call your credit card company back. You are going to have to push to speak to either a manager, or a “customer retention” expert.

Basically, they can and will lower your interest rate, you’re just going to have to be very very persistent.

Try this tactic:

Tell your credit card company that you are going to balance transfer all, or part of the debt to someone else if they refuse to work with you. Why pay 14 percent if you can transfer a large chunk of the balance to a zero percent introductory rate credit card?

In no uncertain terms, just be firm. Remember to ask for a manager if the rep on the other end of the phone is not willing to work with you. Just keep asking, and you will usually be able to wrangle a better deal out of them.

Now, if they absolutely will not bend, then you just need to compare your options.

• Can you balance transfer part of the debt to a lower interest rate card?
• Would it be more beneficial to up your HELOC (Home equity line of credit) at the 8% interest rate?

It really wouldn’t hurt to check your FICO score before you begin negotiations. Everyone else is going to look at it anyway, you might as well know where you stand.

If your FICO score is over 725, then you will definitely want to try the credit cards first. If you could split the balance between a couple of balance transfer credit cards with low interest rates, that would be the best bet. Make sure you qualify for them first though. (That’s why I say check your credit score). Because if you don’t, then generating a bunch of credit inquiries is only going to lower your score, and would not be worth it in the long run.

So, to sum up:

1) Call your credit card company back, and do not hang up until you get a manager, or someone who can make the changes you need. Make sure they give you a permanent rate, not an introductory rate, if possible.
2) If that doesn’t work, try transferring part of the balance to a new low interest credit card.
3) If you need to take care of the remaining balance, then talk to your bank.

Now, if your credit score is borderline 700, then it would probably be best to just go straight to your bank first, for a couple of reasons:

• Credit scores around 700 may or may not qualify for the lowest interest balance transfers.
• If you don’t qualify for those balance transfers, then you will have lowered your score by applying, and you may not get the best deal at the bank either.

So check your credit score before anything else. If you are 725+, try the cards first. Lower than that, try the bank first.

Have a question for us? Leave a comment below!

Keep Reading:

• Editor’s Choice: The Best Balance Transfer Credit Cards
• Which Credit Cards Have The Lowest Interest Rates?
• Do You Know Who Is Looking At Your Credit Score?

This entry was posted on Wednesday, September 24th, 2008 at 9:45 am and is filed under Credit Card Debt, Credit Reports and Scores, Debt Reduction. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.