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Credit cards and credit score

Since most credit card issuers check the credit history before issuing a credit card, if you do not have a good credit score, it is difficult to get approved for a credit card with no annual fees. The individual will usually have to use a credit card designed for people with little or no credit. These cards usually report monthly to the credit bureaus and charge an annual fee.

After using these credit cards for some time and make payments on the amount due regularly, the credit card user may qualify for a credit card with zero annual fees and a lower interest rate. At this stage the credit card user has to decide whether to retain the older credit card and continue paying the annual fee , so that his/her credit history remains unaffected or cancel the old credit card and risk a change in the credit score.

The credit card user can contact the issuer of the original credit card , inform them that he/she have been approved for a new credit card and request a waiver of the annual fee. Some credit card companies may agree to this request, since they may not want to lose a customer and they still make money from every transaction.

If the credit card user is planning to take a big loan like a car loan or home loan soon, it may be better to retain the old credit card and continue paying the annual fee. The annual credit card fees will be insignificant compared to the savings due to lower interest rate.