Credit Card Guide

Top tips to avoid being turned down for a credit card

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Worried about your credit card application being rejected? Follow our top tips to give yourself the best chance of being accepted! (Updated 25/9/09)

As the effects of the credit crunch linger on, lenders are continuing to tighten their lending criteria. This means getting approved for credit can be quite a challenge!

Advertisement

Compare Credit Cards

Financial firms have a duty to lend responsibly. They have to take reasonable steps to ensure that people will be able to pay back what they borrow. Some people, however, are now finding themselves rejected despite having a regular income and good credit history.

In the current financial climate, it is more important than ever to know what makes you attractive to lenders and how you can avoid rejection. Our top tips are designed to give you the best chance of being approved for credit, so good luck!

1. Check your credit report
2. Improve your credit rating
3. Fill in the application carefully
4. Apply selectively

1. Check your credit report

The most important thing you can do before you apply for any type of credit – including credit cards, loans and mortgages – is check your credit report. This is what a lender will look at when deciding whether to approve your application for credit, so it’s essential you know what it contains.

In the UK there are three credit reference agencies – Equifax (www.equifax.co.uk), Experian (www.experian.co.uk) and Callcredit (www.callcreditcheck.com), all of whom collect information about you and share it with banks and other lenders. Different lenders will use different agencies to access information.

You can check your credit rating with each of these agencies online by visiting their respective websites. You could also write to them and ask for your file for a £2 fee – but while this is cheaper than an online check it will take a lot longer.

Alternatively, for £19.55 you can check all three reports in one go, with the Triple Agency Report from Check My File (www.checkmyfile.co.uk). This allows you to view and compare all three reports and saves you £3.90 compared with purchasing them individually.

Check your credit report

Guide to checking your credit report with a credit rating agency

Back to the top

2. Improve your credit rating

Once you have got hold of your credit reports, you will be able to see how good or bad your current rating is. First things first – make sure the reports are correct! It’s important to contact the credit agency if you spot any mistakes on your report or see any accounts listed that have been cleared or cancelled.

If there are amendments to be made, they should be made quickly if the agency agrees with them, although sometimes you will need to talk to the company that originally filed the data.

Occasionally a credit agency may refuse to amend your file – in this case you are entitled to add you own comments as a “notice of correction”. These extra comments may mean your credit applications take longer to process, but your explanations may also help you to get better deals.

As well as ensuring there are no mistakes on your credit report, there are plenty of other ways you can improve it, including the following:

• Cancel old or unused credit cards – That’s right, don’t just cut up old cards and forget about them, actually call up your provider and ensure that your account is closed. Then give the credit ratings agencies a call to check it has been removed from your file.
• Get utility bills in your name – This shows that you have a fixed address.
• Pay your existing bills on time – This doesn’t just apply to credit cards or loans, but also gas, electricity and phone bills, as these are all types of credit. Use direct debit whenever possible to ensure you don’t miss any payments.
• Make sure you are on the electoral role – If lenders can find you on the electoral register, this will improve your credit rating.

10 ways to fix your credit rating

Download our complete guide to credit reports

Back to the top

3. Fill in the application form carefully

Application forms provide lenders with a lot of personal information they need about you, including your age, address, marital status and salary. It’s important to take time to fill in your application form and double-check it before you submit it as mistakes or discrepancies on the form could affect your chances of being approved.

Back to the top

4. Apply selectively

If you need credit, it’s important that you don’t apply for lots of products in a small space of time. This will make you look desperate (or possibly fraudulent) and will damage your credit rating.

Pick the products you apply for carefully and if you need to make multiple applications, ensure that they are spaced out as far as possible.

When choosing which credit cards to apply for, you always consider the APR as well as any 0% balance or purchase deals and special offers. However, there are a couple more things to think about if you want to improve your chances of being approved:

• Your bank knows you - If you have a good history with a particular bank – for example if you have held an in-credit current account with it for some years, and they can see you have regular incomings – they may be more likely to approve your application for credit. So if your current bank offers competitive deals, it may be a good place to start. Having said that, data protection laws limit the amount of information that different groups within a company can share with each other, so the credit department may not necessarily have access to details of the other products you have.
• Different banks use different credit rating agencies – Different lenders use different combinations of reports from the three credit ratings agencies. If you know what is on each of your credit reports, you could adapt your applications and apply to lenders which you know will check your best-looking report. Check out this useful table showing which rating agencies lenders use.

It’s worth bearing in mind that while you don’t want to look like you are inundated with credit, having some kind of credit and managing it properly, shows that you can cope with credit and are reliable. Having no credit history at all can be detrimental to your application.

If you are struggling to build up your credit rating, or have a very poor credit history, you could use a “credit building” company like Vanquis (www.vanquis.co.uk) or Capital One (www.capitalone.co.uk). They use lower eligibility criteria than standard credit card companies, but as they are taking a risk with you, they charge very high interest rates – sometimes as high as 60%. You should only really use a product like this if you are sure you will be able to pay off your balance in full at the end of every month.

Bookmark with:

What's this?