Credit cards are a convenient method of payment, which allow the user to spread the cost of purchases if they are unable to afford to pay for them in full. When you use a credit card to pay for something, the provider is effectively lending you the money.
Each month you will be sent a statement which details all the transactions made and you will then have a certain amount of time to make a payment. If the balance is repaid in full, no interest is charged. However, with hundreds of different cards to choose from and a variety of different criteria that need to be met it can prove a challenge knowing where to start.
Application criteria
With so many companies offering credit cards, there are often a variety of stringent requirements candidates must meet. One among those requirements is huge 'credit score' or a 'best credit rating'.
A good credit status does not arrive instantly and can often take a lot of hard work with persistence and determination.However, this effort may pay off. With a better credit status a credit card application becomes much easier.
If you have a good credit history status then you will get the approval on your application very easily. But the question you may need to answer is, how can you achieve a good credit status?
Credit score
Whether or not you will be able to borrow money will be determined by your credit score, so it is vital to place yourself in the best possible position and ensure you avoid doing damage to it.
Credit card companies will take account of your financial history with banks, credit cards, store cards and lenders.
Sound advice is to always repay your credit cards in full first time around ensuring you will not get picked up by the radar of Credit Checking Agencies like Experian, Call Credit and Equifax.
At the other end of the scale, those with a number of credit cards could be impacted by factors such as missed payments, county court judgements, bankruptcy and applying for credit and failing too often.
Therefore it is best not to leave yourself with a negative footprint. Although blacklists don't exist, it is true to say that a bad credit record can prove difficult to shake.
However, there are a number of things you can do in order to protect your credit rating from unnecessary damage and improve the likelihood of getting what you want.
Ensure you're on the electoral roll
This is one of the first things you should do. Every credit agency will make use of this information so it is essential to be on the electoral roll.
Show a good credit history
Building a good credit history or repairing problems you've had in the past may be a wise move. If you have no credit history you're more likely to be rejected by lenders. Therefore it is a good idea to try and build up your history.
One of the best ways to do this is by getting a credit card which is easy for you to manage. Any kind of credit can allow you to build up a decent credit history provided that you operate it perfectly. To do this, you need to make sure you never miss payments and always stay within your limits.
Avoid continually applying
If at first you don't succeed, try, try again, but only after you've applied for your credit report from the three main agencies to find out why. Don't get into the loop of continually applying and being rejected. Cancelling them will instantly make a less welcoming proposition for future applications.
Cancel any unused credit cards
Having access to credit, even if unused, can put lenders off. If you have a range of unused cards then cancel them. High credit limits give you the ability - in the eyes of lenders at least - to go on a major spending spree at any time. This will lower your available credit and hopefully improve your prospects of the getting the deal you want. However, accounts with good records over a reasonable length of time are worth leaving open as they can improve your credit history.
Pay on time
You should always endeavor to pay your bills on time. Even the minimum repayment plan is better than missing a payment all together.
Just one missed credit card or bill payment can negatively impact on your credit rating, so it is vital to ensure you make the monthly payment on time. The easiest way to do this may be through direct debit. If you are really struggling then it is best to contact your lender to change your repayment schedule - this won't hit you as hard as defaulting, although it will still affect your credit score.
Check the address on all active accounts
Even if you have not used a credit card or mobile phone contract for years, if the account is still listed as open and you had a different address at the time then this can interfere with applications due to identification checks. Ensure you check your file and go through every active account's address to ensure that everything is up to date.
Stability is a positive sign
Demonstrating you are in a stable financial position is a positive sign for lenders. In their eyes an employed homeowner is better than a self-employed renter. The stability of your employment is also an indicator, as is your bank and current address. The longer you can demonstrate things have been consistent, the better.
Spread out applications
Try to spread out your applications for credit. Don't apply for too many forms of credit in a short space of time. This includes credit cards, personal loans, mortgages or insurance.
To compare credit cards from the UK's leading providers click here.
Author: KYM Editor
knowyourmoney - company information
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