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By Mark Lewin Staff Writer
Wednesday, 24 June 2009 |
Poor History Credit Cards
Rebuild and strengthen your credit rating
Capital One Classic
Typical APR: 34.9%
Credit Limit: £100-£2,500
Balance transfer: 34.94% (3% transfer fee)
Interest free period: Up to 56 days
Annual fee: £0
Vanquis
Typical APR: 39.9%
Credit Limit: £250-£2,000
Balance transfer: 34.94% (3% transfer fee)
Interest free period: Up to 56 days
Annual fee: £0
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BEEN turned down for a credit card? You're in good company.
The recession has made banks more jumpy than usual about lending and even the most credit-worthy are getting declined from time to time.
But what can you do about it? We look at why you might have been rejected for a credit card in the past, how you can boost your chances of getting approved next time and how poor history credit cards work.
The Myth of the Black List
The first thing to understand is that just because you got turned down this time, it doesn't mean that you are on some 'black list' somewhere and all future applications will be rejected out of hand. There is no 'black list'.
Instead, credit card companies request information about your borrowing history from credit reference agencies.
The credit card companies then 'score' your application based on their own criteria. So it's possible that one company could reject your application while another would snap you up.
It's also important to remember that banks are profit-motivated. Credit card companies only make money out of people that hold balances month after month. If there's no balance, they can't charge interest and nothing makes the banks unhappier than not making money.
That means if you're one of those people who pay their outstanding balance in full every month you might still be declined as a result of a company policy which favours applicants more likely to pay the bank interest.
However, the scoring processes are broadly similar and there are various things you can do to improve your chances.
The first, and most important, step is to find out what the credit reference agencies are saying about you.
Check Your Credit File
The two main agencies, which just about all lenders refer to when considering your application are Experian and Equifax. Both agencies are currently offering limited-time offers and you can check your file for free if you sign up to their service and then cancel your subscription before the 30 days have elapsed.
If your credit history shows a lot of missed or late payments, defaults or even County Court Judgements (CCJs) then you'll need to first change that behaviour and then approach a lender who is likely to be sympathetic.
Changing Bad Credit Behaviour
When you look at your credit file, try and see it through the bank's eyes. Would you lend you money?
If not, then you might have to delay your application while you tidy up your history a bit. Be extra conscientious about making payments on time for a few months and maybe pay off a couple of your smaller debts all together.
If there are any defaults or judgments registered against you that you have paid off, make sure there is an entry to say that the debt has been satisfied.
Poor history credit cards can help to rebuild and strengthen a past damaged credit rating, however they really must be used carefully or they could spell more trouble than good.
As you can see from our sidebar the interest rates on poor history credit cards are significantly higher than other credit cards, this should help discourage letting your balance roll over to avoid any chances of spiralling back into bad debt and further damaging your credit rating.
By consistently paying off the balance on a poor history credit card you can work towards improving your credit score.
Check Application Requirements
Don't think for a moment that if you don't meet any of the criteria, the credit card company will just turn a blind eye to it. Read the application requirements carefully.
If the lender requires you to have a good credit history, for example, and you know that yours isn't up to scratch follow the above steps to change it or look for a poor history credit card rather than applying on the off chance. If you are rejected out of hand, your application may put other, more sympathetic, lenders off in the future.
Likewise, if the credit card company expects you to earn £25,000 pa or more per year and you earn £24,500, they are not going to make a special case just for you. Remember that most applications these days are handled almost entirely by computers. Computers don't wake up one morning feeling in a good mood and deciding to ignore the odd £500 per annum.
Take the time to compare credit cards and make sure that you get the card that's right for you and the best deal possible.
Check Application Details
Be careful about completing your application. Take the time to ensure that all details are correct and that you haven't, say, dropped a zero off your salary.
Never be tempted to lie. Lenders are not silly and if they discover that you lied on an application either now or at some stage in the future, they'll come down on you hard. You could even face fraud charges.
So, check your credit rating, make sure the deal is right for you, tell the truth and you might just get the credit card you want.
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