Do guaranteed credit cards exist?

AFTER a recession-induced break 'guaranteed' credit cards are once again beginning to slip through UK letterboxes.

The siren call of pre-approval is likely to draw in more than a few consumers but do guaranteed credit cards actually exist?

Short answer

No.

Long Answer

Pre-approved credit card offers aren't actually offering guaranteed credit cards: 'guaranteed' implies that you're 100% certain to be accepted.

Yet no credit card actually offers guaranteed approval, all providers will expect you to undertake a credit check before you'll be considered, which means that your application could be declined.

'Pre-approval' itself is a more or less meaningless marketing term, it's simply an invitation to make an application.

However, declined applications look bad on credit scores but demonstrating a commitment to good borrowing practices is impossible without actually having a form of borrowing to use well.

No wonder, then, that people are on the look out for guaranteed credit cards and are so often disappointed when they turn out not to be guaranteed after all.

Disappointment

According to March 2011 research from CallCredit, 78% would be less than impressed after being turned down for a credit offer they received in the post.

In fact, 39% said they wouldn't deal with the credit card or loan provider again at all after being promised, and subsequently declined, borrowing.

A further 9% said they'd lose all trust in the brand that had offered them credit and 39% said it would give them a negative impression of the brand.

Like 'proactive' credit card marketing, advertising to existing cardholders, guaranteed card approval turns out to be a double-edged sword for companies as well as consumers.

The alternatives

'Poor credit' deals

Of course, some plastic that likes to pose as a sure thing does actually have a high chance of acceptance.

Yet CallCredit's research found that it wasn't always those deals which were being marketed through the post.

1 in 11 adults they surveyed said that they'd received an offer for credit that they thought was inappropriate as a result of their poor credit history.

The proportion was highest among 35-44 year olds: 15%.

An even higher proportion - 56% of people - didn't think that the credit card or loan offers they'd received were relevant to their financial situation more generally.

The researchers underlined the importance of research into application criteria and suitability before application, then.

While in no way being guaranteed credit cards, well-researched credit cards can offer a higher chance of acceptance even for those that have a really serious problem such as bankruptcy.

In particular, there are cards available to those with less than perfect credit scores and as such could be considered as easier to get accepted for. These cards are often known as bad credit rating credit cards.

Bad credit rating credit cards generally have high interest rates and no reward schemes or introductory offers. They're intended only for very short-term borrowing (within the interest-free period) and repairing a damaged credit score.

There are currently four major providers who offer sub-prime credit cards: Barclaycard, Capital One, Vanquis and the aqua card issued by the Bank of Scotland.

These are by no means guaranteed credit cards however. Applicants are still liable to be - and often, are - declined.

However, there is a third way: prepaid cards.

PrePaid Cards

Ok, so these aren't quite credit cards but prepaid cards are probably the closest you can actually get to a guaranteed credit card.

Since prepaid cards aren't a form of borrowing they don't require applicants to undertake a credit check when they apply so - unlike 'guaranteed' credit cards - applications are actually generally guaranteed to be accepted.

Having said that, however, most mainstream prepaid cards will require some form of identification for the applicant to open the account and more advanced prepaid products - such as the CashPlus creditbuilder card - may require several forms of ID.

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