Credit Deals

by Caleb James on 22 Mar, 2012

When it comes to applying for credit, most people agree that your credit rating is extremely important – the better your rating the more likely you are to get the deal you’re looking for, right? Well, yes, and no, and it’s a bit more complicated than just popping online to get a free credit report from a company like CreditExpert and then being sure that any application you make will be successful.

The first thing to remember is that there is no universal credit rating, there are files on you that keep track of all your financial transactions back to a certain date, but there’s no great number hanging over your head. Each bank, or lender, that you apply to will run a search on your records with companies like Credit Expert, and also consider your application before deciding whether to give you credit.

However, the simple fact of having a search done on your credit record can have a negative impact on your credit rating – although one or two are unlikely to make much difference. However, if you apply for loads of different credit at the same time, all the different searches will be flagged up, and may be used as a reason not to give you credit. So, the important thing is to make a firm decision as to who you want to borrow from, and then go and apply, rather than applying wholesale.

Another important thing that’s worth mentioning is that just because you have never had any problems with credit, and always pay everything off on time (or ahead of schedule) doesn’t mean you’ll get approved for a credit product.

The reason for this is that it’s the lender who makes the final decision, and it’s not in a bank’s interest (for example) to have a perfect customer on their hands. You may know that paying off all your debts immediately and never having an outstanding balance on your credit card is the perfect way to handle debt, but the bank may well be less convinced.

This is because the ideal customer for a bank is one who makes them money, if you always pay off all your debt on schedule and don’t incur interest, then you’re not earning them extra cash. The ideal customer is one who pays off their borrowings, but little by little, and preferably only the minimum required amount every time.

Of course, in practical terms, it rarely happens that someone with a perfect credit rating is turned down. The bank would rather be lending to you, if for no other reason than it can offer you other products, than have you go somewhere else, but it’s not unheard of for people to be rejected without any particular reason.

Finally, remember that when it comes to applying for anything, the advertised rate is that which the majority of the population can get – i.e 50.1%, so whenever you apply for something, bear in mind that what you want isn’t necessarily what the bank will give you, and that if you have any problems or complaints with your experience, you can always get in contact with the FSA.

About the Author

Caleb James

Caleb James is a financial advisor and journalist, who contributes regularly to financial blogs and industry publications.