The recent recession has affected the UK and its economy in a number of ways. Many have seen their disposable income dwindle while others have found themselves without a job. It has also forced banks to make large changes too, notably to their loan lending criteria.
Banks are now extremely cautious regarding who they lend their money to, meaning if you have poor or no credit history, you’ll immediately fail their credit search.
This has spelt bad news for young adults looking to establish a good credit score from an early age. However, it shouldn’t put you off applying for credit; it’s just a matter of knowing what to apply for and how to apply.
One of the best ways of establishing your first item of credit is to apply for a credit card. Yet with so many providers out there each offering a different products at different rates – it can be tough to know which one to go for. Here are some top tips to take into account when looking to apply for a credit card:
Preparing to make an application
Diving straight into an application is not a good idea, not only do you run the risk of missing out on the best possible deal, but you also run the risk of being declined if you fail to meet one of the criteria points.
It’s highly unlikely that you’ll meet the criteria of the low rate mainstream providers, as these will require applicants to have a very good credit history. The type of card you should be looking at is ‘credit builder’ cards. The rates of these cards will appear high, however by paying off the complete balance each month you will avoid all interest.
You’ll also notice that these cards will come with relatively low credit limits, however as you’re really only using the card to establish a good credit score and are not going to be using it for large purchases, it shouldn’t be a problem. Also, providing you can show the lender that you can manage the card well, there’s a chance they’ll increase your credit limit.
One of the best ways of finding a suitable credit card is by using a comparison websites. Having entered some basic details on their initial application form you will be presented with a number of suitable options. Prior to making an application, check the criteria points to ensure you meet each points.
These credit builder cards will have relatively lenient criteria; however they are likely to require the applicant to be:
- Over the age of 18;
- Not recently bankrupt;
- Not in a CCJ;
- In full time employment;
- On the electoral roll
Having found a card that you feel is suitable and you have made yourself aware of the fees, charges and repayment details –you are ready to apply.
Boosting your credit score
Having been approved for your card it is now important that you manage it in the right way to ensure that boost your credit score. Simply not using the card and allowing it to lay dormant will not work. Equally overusing your card, exceeding the credit limit and failing to make payments is likely to have a negative effect.
Using your card sparingly, repaying the balance in full at the end of each month will go a long way to improving your credit score. Ensuring you are on the electoral roll at your current address and that there are no errors on your credit report will also help.
Providing you do all of this; you’ll soon find that you will qualify for some lower rate loans and credit cards.
This article has been written by Jason Scott on behalf of Guarantor Loans Online.