In a perfect world no one would need credit. People would have enough time to earn and save the money required for buying things like a car or a house. Credit cards would only be used for the benefits they can provide such as cash back rewards and other bonuses, and we would never have to pay any interest. There would be no such thing as a credit history or credit report.
Unfortunately, this is not the case, and most people need to borrow money to make these large purchases. In order to qualify for the best interest rates the market has to offer, lenders reward people with the best credit history offering them access to these products.
It doesn’t stop there, as you may be surprised to learn that some employers and landlords check your credit history before offering jobs and rented property. In today’s society, there are few ways of escaping the need for credit.
How your score is generated
Whether you’re looking to take out a loan, mortgage, overdraft, credit card, contract mobile phone, utility bills or even monthly car insurance, every type of lender ‘scores’ you to predict your likely behaviour, in order to build up a profile to indicate how financially attractive you are.
In many cases if you miss a periodic bill or make a payment after the agreed date, it will have a negative affect on your score.
Banks use a number of pieces of information when coming to a decision as to whether they will lend to you, including data held by three companies known as ‘credit reference agencies’: Experian, Equifax and Callcredit.
If you have no experience with credit, you are unlikely to have a credit history, which can work against you when looking to borrow. This is because lenders want to know that you can be trusted when giving you credit, which is usually done by using your previous track record.
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There have been a number of significant changes in the credit card market since the last quarter of 2008, mainly caused by the the credit crunch.
Irresponsible lending has been blamed for causing the credit crunch, after many lenders began offering out cards to any Tom Dick or Harry, advertising them as debt consolidation solutions or interest free loans through 0% deals.
This makes it understandable that credit card providers have become stricter on who they lend to, tightening acceptance criteria making it harder for some to be approved for credit.
This caused a fall in the acceptance rate, as providers recognised that this previous lending trend needed to be broken as many believed it was this that triggering the financial crisis in the first place.
However, within the last few months the market has seen a rise in competition, which has increased the amount of choice available and in turn led to a growth in consumer appetites for credit cards.
Something else worth noting is that many providers have made these attractive deals available to existing customers only as a way of reducing the risk factor, as this allows the provider to have a pre-existing relationship with the customer, thus enabling them to make a better judgement based on customer profile history.
An existing customer is someone that already holds an account with the provider, such as a savings account or current account.
An example of this is Natwest and RBS, both of which recently increased the balance transfer duration on their Platinum credit cards from 13 months to 15 to all existing customers.
There is nothing stopping you from exposing yourself to the best credit card deals on the market by opening a number of different current accounts spread across multiple banking institutions, as these days most accounts cost you nothing to open with no maintenance costs, so you have nothing to lose in doing so.
According to the British Bankers’ Association, in April, the amount of outstanding credit fell by £412 million to £64.3 billion, £457 million less than the same month last year. The proportion of balances accumulating interest also fell by 0.9 percent to 72.9 percent.
If you have been rejected for a credit card, it is probably due to your credit history not meeting the lenders criteria. It may be worth looking into poor credit history cards, as these are designed to accommodate people that have found it hard to be accepted for a credit card due to a number of reasons.
Virgin Money Credit Card
Virgin are now offering a fantastic 16 months on 0% balance transfers. This has increased from it’s previous period of 15 months, stepping it up to the longest period available on the credit card market.
This card is recommended for those that wish to transfer a balance over to pay it off, rather than a card to make purchases with, so if the Virgin money credit card sounds right you you, come and apply at Which4U
Please note: If you have one of Virgin’s sister credit cards through MBNA, you are unlikely to be accepted.