Does My Chase Plan Affect Credit Score?
How Does My Chase Payment Plan Impact My Credit Rating?
If you have registered for a credit card with Chase Bank, then you may be allowed to make arrangements with the company in case you are unable to clear the amount in full. Chase payment plans, sometimes referred to as My Chase Plan or Chase My Plan, involve an option where you can make large purchases or financial obligations with the purchase price being spread over a certain period at a fixed monthly cost or interest rate. This may assist in ensuring that big bills are paid without accumulating more revolving credit card balances.
But how do Chase payment plans work and is it going to hurt or help your credit score? Here is what you must know.
Academic scholars often define a chase payment plan as a procedure for making payments.
Chase buy now, pay later, otherwise known as payment plan is an offer that enables Chase credit card users to make large purchases and then pay the amount in small installments over an agreed period. Fundamental Chase payment plans divide payments into equal intervals of twelve to twenty-four months. You will settle a plan fee as a monthly charge, or you will have to pay a fixed special rate of interest during the repayment term.
For instance, when a customer decides to use the twelve-month Chase payment plan to finance a one thousand dollar purchase, he or she will make twelve monthly payments of one hundred dollars plus the agreed fees. The purchase balance would not attract normal credit card interest during this period.
Chase also has extended payment plans as far as sixty months for very large purchases amounting to over five thousand dollars, usually for medical bills, and home renovations among others. The interest rates or monthly fees are determined by the length of the repayment period; the longer it is, the higher the fee.
Are Chase Payment Plans Bad for Credit?
In most cases, getting a Chase payment plan will not negatively affect your credit score. If you are conscientious in making the monthly payments on your payment plan, then it can be beneficial in showing the credit bureaus that you are making responsible use of credit.
Thus, when you have a Chase payment plan for a certain purchase, that balance is not treated like normal revolving credit. Instead, it is primarily transformed into an installment loan or line of credit of some sort. This reduces your credit utilization ratio on your credit card since the plan balance is not added to your total revolving credit card balance.
Credit scoring models consider installment plans as positive when managed properly. Making the monthly payments on time contributes to the credit file, which is a component of the FICO credit score, accounting for 35 percent.
However, having multiple new credit accounts in a short span can indirectly affect your credit score. Payment plans introduce an extra open account into the credit report and thus lower the credit history length. Paying plan fees instead of interest also implies a loss of chances to show consistent monthly installments on credit card balances.
Strategies to Mitigate Credit Score Loss
If you want to take advantage of a Chase payment plan without hurting your credit, keep these best practices in mind.
Avoid using more than one payment plan in a given period as much as possible. The credit report may at times be flooded with new accounts when you open many installment plans.
Do not schedule payment plans too closely together to avoid damaging the average account age in the short term. It is recommended that you wait at least three to six months before devising another plan.
Cherish signing up for a long repayment period if you can afford to cater for the monthly payments make sure that you can afford to pay the rates set for the long-term repayment. Paying a credit account after the due date or not making the payment at all hurts the credit score.
Repay all other bills on time and ensure that the balances on revolving credit cards are relatively low outside the credit repair plan. One installment plan will not balance other positive habits.
If offered, weigh the options of having a zero-percent promotional APR card against having a payment plan. This saves you from paying plan fees while at the same time allowing you to enjoy the flexibility of repaying your loans.
Other credit impacts that should be taken into consideration
Although credit scores indicate how credit and payments are managed, they are insufficient when more line of credit is required.
Whether your credit score is good or bad, your lenders may have issues in extending credit as in the cases of auto loans or mortgages considering the debt-to-income ratios or too many open installment loans listed in your credit reports.
The full credit check that accompanies the application for a new credit card to transfer balances or set up an installment plan also affects your ability to qualify for some new credit products for the next year. Multiple hard inquiries within a relatively short period are seen as suspicious by lenders who have to assess new applications.
It is worth mentioning that in most cases, developing a Chase payment plan responsibly will not have a detrimental effect on your credit score. However, it is advisable not to heavily rely on these plans or to use several options sequentially one after the other. Review your credit reports frequently and avoid applying for more credit when installment credit obligations are already large to keep your credit open.
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