Deal yourself an ace in the credit card race
16/06/2008
It’s hard to imagine life today without a credit card or three – but the credit crunch means that getting the one you want might no longer be a simple matter of filling in a form and waiting for your shiny, new plastic to arrive.
Before you apply, it pays to do some groundwork. These suggestions should help you to play your cards right:
1. Check out the market
Don’t rely on the direct mail that flops onto your doormat –
compare credit cards online to find the right deal for you. You can pull together a far wider range of options than you would find on your own and can match your circumstances to the deal that will suit you best. That means you’re less likely to face a rejection and more likely to get a card that really works for you. Remember to provide accurate information, or they’ll point you in the wrong direction.
2. Look up your credit report
This is your personal credit history, showing your loans, mortgages and other credit commitments, your repayment history and other information such as whether there are any court judgments against you. Lenders usually see your report before they decide to offer you a card and what interest to charge, so you should ensure that it’s accurate and up to date. A single error could mean you don't get the deal you want.
See your free Experian credit report now.
3. Don’t over-extend yourself
If you’ve already got a couple of cards, as well as a loan or two or a mortgage, another card could simply add to your burden of debt. Take a good look at your finances before you apply to be certain that you really can afford to borrow more. That’s what lenders will do and if they think you’re already over-extended, you could be turned down.
4. Understand the costs
Many cards have attractive introductory offers, others set a wide range of interest rates – and it can all be thoroughly confusing. Look beyond the headlines and read through the terms and conditions before you make your choice. Look for application and balance transfer fees, charges for using cards abroad and for withdrawing cash. There may also be annual fees to consider.
5. Don’t use a scatter-gun
If you fire off applications at random, you might damage your credit status. Every time you make an application, the lender will search your credit report and leave a record, known as a footprint. If you generate a large number of footprints in a short space of time, lenders can think you’re desperate for money or even that a fraud is being planned, which won’t improve your chances.
6. Use common sense
There’s no point asking for a gold or platinum card if your finances are stretched. Equally, don’t hold out for the spending limit you think will get you out of trouble – many lenders have recently reviewed their current cardholders and have sometimes reduced spending limits to match individual circumstances.
7. Understand why you’ve been rejected
Ask lenders why they’ve turned you down. It could simply be that you don’t fit the profile for a particular card – for example, it could be aimed at older people or students. Equally, they could have identified something in your credit report or application form that you should know is seen as a problem Once you understand the reason for a rejection, you can work on improving your chances.
8. Pay your bills on time
Lots of us think it won’t matter if we skip the occasional repayment – one survey found that 5.1 million people did just that in December 2007. But even a single missed repayment will show up on your credit report and will stay on it for at least 36 months, damaging your chances of getting credit in future.
9. Don’t rob Peter to pay Paul
A credit card is a useful way to manage your finances, allowing you to take advantage of bargains and to spread the cost of major purchases – but it is not a route out of financial trouble. If you are thinking about taking out a card to pay off existing debts, think again. Review your financial position, see if you can cut back anywhere, set yourself a budget and, if you can’t see any alternatives, get free expert advice. Try Citizens’ Advice at www.citizensadvice.org.uk, the Consumer Credit Counselling Service at www.cccs.co.uk or the Debt Advice Trust at www.debtadvicetrust.org.
10. Admit when you’re in trouble
If you’ve over-stretched yourself or a change in circumstances means you’re worried you won’t be able to keep up your payments, don’t stick the bill in a drawer and your head in the sand. Stop using the card and get in touch with your card issuer to explain the situation. You may be able to work out a schedule of repayments that you can mange.
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