Have you been rejected for a credit card? Here’s what you need to do to get one
IT can be a worrying time when you apply for a credit card and get rejected.
If you've been in financial difficulty before, or you've got no history of borrowing, you could find that you're unable to get accepted for any credit at all.
But all is not lost - there are a number of things you can do to improve your chances and get yourself back on track.
There are some credit cards on the market that are designed specifically for those who have got into trouble with borrowing before but now want to show they are responsible.
The Sun Online explains what you need to know.
What is my credit report and why does it affect if I can a credit card?
Simply, your credit report is a record of your financial history.
It contains information on you bank accounts, any credit cards or loans you have and the debts associated with them, any late payments you've made, any County Court Judgements (CCJs) made against you or if you've been declared bankrupt.
The info is held by one of three three main Credit Reference Agencies (CRAs) in the UK - Experian, Equifax and CallCredit - and it's this info which is used by lenders to decide whether they are going to lend you money or not.
So if you've had problems with debts and credit in the past, it's likely you'll lenders will be more reluctant to lend to you - or at all.
What about my credit score?
It's easily to get confused about credit scores.
When you check your report with one of the CRAs, you'll be given a score but all the companies have a different scoring system. higher you score, the better your rating.
The higher your score, the better your credit rating, BUT they aren't a guarantee that you'll definitely be accepted by a lender or be offered its best rates.
Instead, there just an indication of your credit-worthiness and how likely your are to be accepted for borrowing.
HOW YOU CAN IMPROVE YOUR CREDIT SCORE
WHILE there is no credit blacklist which bans people from any sort of borrowing at all - if you have struggled in the past you may find lenders won't consider you.
Here are tips to help you improve your rating:
- Don't make too many credit applications - Making lots of requests in a short period of time can be seen as a sign of financial distress - and each application will be recorded on your file. Use a "soft-search" eligibility calculator to show how likely you are to be accepted.
- Always pay your bills - Late payments are also recorded in your file so make sure you pay your monthly bills on time including utility and credit cards.
- Pay down your debt - Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already a large amount of debt.
- Use a credit-builder credit card - These cards tend to have high interest rates compared to normal cards but if you can show you're a responsible spender with them, it can improve your chances in the eyes of lenders.
I've been rejected for a credit card. What can I do?
As tempting as it is, the worst thing you can do if you've been rejected from one credit card is to apply for loads more straight away.
This is because each time you make an application, it will be recorded on your report - so you making lots of applications in a short period of time could be seen by lenders as a sign of you being in financial distress.
On the flipside, if you've never taken out any borrowing and you've got no credit history, you could also find it difficult to be accepted as lenders have no record of you showing you're good for the cash.
What about credit building cards?
These cards are designed to help you start building or repairing your credit report.
The idea is that by using them you can show you're a responsible borrower and can pay-off the money you've borrowed.
Before you look at these cards though, there's a few things you need to be aware of, otherwise it could cost you.
If you're already in lots of debt think long and hard about if you want to take out more credit - paying down your existing debts should be your priority.
These cards come with high rates of interest and a lower credit limit than you would be offered on a "normal" credit card - so if you do get accepted you must try and clear the balance every month, or pay at least the minimum repayment.
Remember, the advertised APR you see is just that - so you could still be accepted for a credit builder card but at an even higher rate.
And whatever you do, never withdraw money on them either. As well as being an expensive way of getting cash, lenders could view it as another sign of you struggling with your debts.
Here are some of the cards that are available on the market at the moment - what limit and APR you'll get is dependent on your personal circumstances.
, APR 34.9 per cent, starting limit of between £150 and £1,200
As well as being a card for those looking to build their rating, Barclaycard's Initial card comes with 0 per cent on purchases for the three first three months.
APR 34.9 per cent, starting limit of between £230 and £1,200
Aqua's card starts with an ARP of 34.9 per cent but if you can pay your bills on time and not go above your limit, you could see your APR reduced by 5 per cent each year.
, APR 34.9 per cent, starting limit of between £200 and £1,500
If you show Capital One you can use your card responsibly you could see your limit increased twice a year.
What else should I be aware of?
It's really important that you try and clear the balance you have each and every month ans otherwise you'll start paying interest at the higher rates these cards have.
If you don't try pay at least more than the minimum repayment to try and cut down the amount of interest you accrue.
Ultimately if you fail to keep with your payments, the card provider could take you to court and you could end up with a CCJ against your name - which will again damage your credit rating.
HOW TO CUT THE COST OF YOUR DEBT
IF you've got lots of debts, you shouldn't think about getting more credit. Here are some tips from Citizens Advice on how you can take action and get professional help.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at money@the-sun.co.uk or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.