Finding a credit card that has a low annual percentage rate (APR) is possible if you already have a good credit rating; however, financial institutions are getting stricter with their criteria. Credit cards can be risky asset, especially since there are charges for late payments and a higher debt if you choose to make only the minimum payment, but they are also a great way to improve your credit rating over the long term. Credit cards are still available for individuals who have bad credit, but the credit limit may only be small and increase only when the lender can assess your repayment history in how much you repay each month.
The belief about credit cards is that paying off the full balance is the best way to improve your credit rating, but this is not true. When applying for any type of credit, including store cards, secured cash loans, unsecured loans, card cards, or mortgages, the lender browsing through your credit history and then considers whether you are trustworthy. The usual credit reference agency that they use is Experian or Equifax. Before signing up for any credit, it is best that you obtain your credit file to discover if you have had any searches done in the previous six months, as this can affect your rating with the new lender. Experian offers a free month’s trial, or request a copy by writing a short letter enclosing a cheque for £2.00 to either credit reference agency. Any missed payment will be noted on the credit file, unless you informed your creditor beforehand and another repayment plan was agreed.
The Companies Listed on Your Credit Report
All creditors are recorded on your credit file, but what is also important to note is that your mobile phone, landline and debt collectors are recorded on your file. New searches by lenders are recorded and kept on your credit report for six months. The more searches there are on your file the lower your rating will be with new lenders.
How to Win and Still Get a Better Credit Rating
If you have a credit card with high interest, a good way to gain an advantage over a credit card is to overpay on the minimum amount the creditor requests each month. However, repaying only the minimum amount will still improve your credit file. The only person getting richer in this instance is the credit card lender. Even if you can only pay an additional £5 per month, always try to pay more.
If you can, transfer your current balance to another card, if your new credit limit allows for this. Try to find a card with the lowest interest rate. There are credit cards available offering a rate of 0% lasting between six to twelve months, however, these are rare. Remember to obtain a copy of your credit file before applying for new credit.
Why an Unused Credit Card can Reduce Your Debt Percentage
If you have bad credit but still have a credit card that you no longer use, keep this as it will reduce your overall debt percentage. This information will be visible to your lender when they search through your credit file to make a decision. If you move your credit card to a new lender without being unable to transfer the full balance, this could lead to a higher debt percentage and even lower your score. What is worse about having a new credit card is the fact that it will not display a payment history. Keep old credit card accounts open, as this will support your overall credit.
An Easy Way to Improve Your Credit Limit in Six Months
Credit card lenders will frequently review your account and if you have been paying on time, and making overpayments on the minimum balance, they may increase your limit without your permission. However, if the limit has not increased after six months, give them a quick call and they should increase this at your request.
Katie Latchford is a writer who is always seeking new ways and means of saving money and clearing debt. She has noticed that a large credit card debt can be added to a debt consolidation plan to help ease its clearance.