Having a credit card is no longer a luxury and is rapidly becoming an essential accessory for modern day living. However those who have had financial problems in the past may find it is difficult to find a lender who is willing to view their application sympathetically.
Unfortunately, randomly applying to lenders in the hope they approve your application can actually worsen your credit score. The reason for this is that the applications leave a footprint on your credit file and when a new lender sees this, he may assume that you are in financial difficulties – hence the multiple applications – or may be overstretching yourself.
It is therefore essential to restrict applications to lenders who are more likely to approve those with a less than perfect past, at least until the credit score has improved.
The best way to find a lender is to use either comparison or money advice sites as many of these highlight the best companies to approach for those with a poor credit score. If you are unsure how bad your score is, some places also offer a free credit checker which provides an idea of how your credit file may appear to a lender based on some simple questions.
Unfortunately the best deals in the market, such as the 0% APR offers are usually only offered to those with exemplary credit records making them out of reach for those with black marks on their file.
Anyone who has financial problems or little cash to spare should avoid further borrowing, but there is an exception: if you are trying to rebuild your credit rating.
There are several steps you can take to bump up your score, such as closing inactive accounts, correcting inaccuracies on your file and ensuring you are on the electoral roll. However, one of the best ways is to simply get more credit and run the account impeccably, ensuring that all payments are made on time without exception.
The only problem with this approach is that often the only cards that will accept applicants with a poor credit score charge extortionate levels of interest. But as the card is only being obtained for the sole purpose of improving the credit score this doesn`t actually matter too much .
This may sound rather confusing but the key is in how the card is used. Under no circumstances should it be run like a normal credit card with the balance paid off over several months as this will prove extremely costly with the amount of interest that will be added. Instead, the balance should be paid off in full each month, which means that it will avoid any interest charges but also will add even more points to the credit score as lenders like to see borrowers paying back more than the minimum installment.
However, some individuals will struggle to get their application accepted and there is an alternative route which is open to everyone which will help to add points to the credit file, for a small cost.
Prepaid cards offer no credit facility and must be topped up before use – essentially a pay-as-you-go credit card. It provides holders with the convenience of a credit card even when they have a poor record. As there is no credit facility, users will not improve their credit score by using this type of card.unless they add a credit building option.
An increasing number of prepaid card providers are offering account holders the chance to add points to their credit score each month by purchasing a credit building product. Typically this costs around £5 each month, which the company class as a loan and report each monthly payment to the credit bureaus, thus increasing your credit score.
Many people have the misfortune to experience financial problems and are refused credit but with the right approach it is possible to get accepted for both a credit card and a loan for bad credit.