Improving Your Chances of Being Approved for a Credit Card
A credit card can be used for frivolous or essential purchases. Relatively secure and undeniably convenient, the credit card provides a degree of comfort for shoppers and bill payers. Of course, not everyone has access to a credit card; indeed, restrictions on lending have prompted many banks and credit providers to limit the number of successful credit-card applicants.
So how exactly can applicants improve their chances of being approved for a credit card?
Credit-card applicants encounter plenty of obstacles in their search for plastic, but none is as large and difficult to overcome as a poor credit rating. Credit reference agencies hold information about people who have obtained or applied for credit in the past. This information is used to build a profile of each individual, whose creditworthiness is represented as a numerical score. The greater the score, the better the credit rating.
Credit ratings range from poor to excellent. How scores are calculated and interpreted depends on the credit reference agency in question. For instance, Equifax categorises credit scores as Very Poor (0-299), Poor (300-349), Fair (350-399), Good (400-474) and Excellent (475-900).
The variation in systems used by credit reference agencies is important because different creditors use different agencies. This means that a good credit rating for one bank might be considered poor by another. The three leading credit reference agencies in the UK are Experian, Equifax and Callcredit.
Individuals ought to obtain a copy of their credit reports to improve their chances of successfully applying for a credit card. A credit report, which is notably different from a credit rating, can be ordered online (usually free of charge for a limited period). The standard cost for postal orders is £2. Credit reference agencies are legally required to send credit reports to those who request them.
The credit report should be scanned for errors. Mistakes can easily diminish an individual’s creditworthiness. Creditors might have sent erroneous payment details to the credit reference agencies, for example, or information pertaining to another person might be present on the file. Basic details such as names, Electoral Roll registrations and current and previous addresses must be checked for accuracy.
A person might also request that a financial association be taken into account or removed from a profile. Spouses and partners often share finances, but this relationship does not have to appear on a credit report. If a financial association has been made with someone whose credit rating is poor, the individual should consider making a request to remove the link from the report.
Likewise, provided that a financial association exists in reality, a link can be established with someone who does have an excellent credit rating. This often has a positive effect on the person whose credit rating needs a nudge in the right direction, but it cannot repair the damage of late payments, defaults and County Court Judgements.
Overcoming a Negative Credit History
Any person whose credit report shows evidence of poor decision-making (i.e., too many searches at once, late payments, too much credit and defaults) will probably have a low credit rating, which can be analysed in more detail by purchasing additional information from the credit reference agencies (knowing the score can help establish how much damage has to be undone).
A poor credit rating does not change overnight, even if incorrect entries are removed and details are amended. To ensure that an application for a credit card is successful, a person with poor or no credit history must rebuild his or her report one month at a time.
Low-risk credit agreements such as mobile phone contracts and low-value, high-interest loans can be taken out for this purpose. Credit ratings usually improve after six to twelve months if repayments are made on time.
People who compare loans, insurance policies and other financial products at MoneySupermarket should already be aware that obtaining credit can be difficult in today’s economy, but comparison sites like this offer a whole range of products to suit differing needs. Whether you have poor credit history, want to do a balance transfer or are looking for a great card for travelling, you’ll find a huge selection of all of the latest and greatest products currently available.
Article written by Lucy at Money Supermarket