The bottom line for any bank or financial institution which lends money to anyone is: what is the risk of default on the loan, and how much money will they make from the deal. Ultimately a creditor is a business that needs to make money just like any other. If they feel that you will not be able to pay back credit there is no way you are going to get it.
However, every credit card company has its own criteria for lending money and just because one institution declines your application doesn’t mean everyone will say no, especially with some companies offering a credit card for bad credit. However, they all use credit reference agencies to help them come to a decision so there are a number of things you can do to improve your chances and increase your credit rating.
The simple steps
• Credit applications
Before making an application it might be a good idea to check your credit rating at one of the three UK credit reference agencies: Experian 0844 4818000; Equifax 0870 0100583 and Call Credit 0870 0601414. Several credit checks in a row can count against you so it’s better to know before applying if your credit rating is good or bad. If your credit is bad you can take out a bad credit credit card. The interest rates may be high but it is one of the best tools to get your credit rating back on track and if you repay in full every month you will pay no interest at all
• Get on the electoral register
The electoral register contains the names and addresses of all citizens eligible to vote in the UK. If you are not on it, money lenders may think twice about extending you credit. To rectify this contact About My Vote or your local council to register.
• Is your bank account in order?
Before handing out credit cards, money lenders like to see that you are used to handling money and have held a bank account for many years. You are much more likely to get credit if you have a well managed account and stay within overdraft limits. If you don’t have an account, get one.
• Balance transfers
Avoid being the sort of customer that keeps transferring their credit cards UK balance between different suppliers. Banks will eventually become wise to this and if they think they will not make money out of you they are unlikely to offer credit. Instead, if you have more than one credit card, see if you can transfer the balance to existing cards by contacting your lenders and asking what special interest rates they can offer. Sometimes the savings can be massive.
Long term credit repair
Stability is viewed very positively by credit card companies. Creditors like a customer to be in full-time employment and to have lived at the same address for at least a year. If you are considering moving and need credit, apply before you leave your current address.
Creditors will take a negative view of any kind of loan default, mortgage or rent arrears, county court judgements, late payments and bankruptcy. Once this information is recorded there is not much you can do about it and it will stay on your records for six years.
The best course of action is to pay off any outstanding debt and then your records will show that it has been cleared. However, if there has been a mistake made or you think a decision was unfair you can dispute it and get it removed from your records. Contact your creditors first, then the ratings agency and, if all else fails, contact the Governments Information Commissioners Office to explain your case.
You may not be able to work on all the things listed above at the same time but if taken step by step you will soon be back on track and able to receive the best credit deals once again.