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Friday, November 14, 2008

Rating your credit potential

By Sophie Wright

If you want to take advantage of a low rate credit card, then now might be the best time to do so. Recently there have been some major changes in the world of credit cards; fees for services such as cash withdrawal and use of cards abroad have gone up, limits have been cut and more applications are being turned down. With the economic downturn currently affecting the market both in the UK and abroad, things may get worse before they get better. This means even more changes to the types of cards being offered. One type of card that may be affected is the low rate credit card.

The first thing that you need to ask yourself is whether a low rate credit card is the best option for your needs. Many people fall into the trap of thinking that low rate cards are the best cards available on the market and forget to look at other types of card that may be more suitable. Yes, low rate credit cards are amongst the best on the market, but they are not the only option or even necessarily the best one for you. If you want to transfer your balance so that you can reduce the amount of interest you are paying, then you could perhaps look at 0% balance transfer cards. If you simply want to make a cash purchase with minimal interest payments, then a 0% cash purchase may be more appropriate for you.

If you have decided that a card with a long-term low APR is the best for you, then you are going to have to face some hard facts. With the economic downturn, this type of offer will decline; it is simply too good an offer to give in a risky financial climate. To add to consumer's woes, the number of applications rejected for these types of card is rising.

If you still feel that a low APR card is the best one for you, there are ways to improve your chances of being accepted by the credit card companies. The most important thing to do is to improve your credit rating. Your credit rating data is held by three companies in the UK and is a record of your repayment habits, the amount of times you have applied for credit and so forth. It is checked by financial providers before you are accepted for any financial service. If you have a poor credit rating, you are more likely to be rejected for a card. In the past, financial companies have chosen to overlook minor flaws in an applicant's credit history. Nowadays, they are far more particular.

Your credit rating can be improved, though. Applying for credit and being accepted will boost your rating. Paying off loans and credit that you have been given in full, and paying off monthly repayments on time will prove to credit card companies that you are not a "bad risk" customer. You can simply apply for credit that can be easier to get hold of, such as store cards. You can then make purchases using that card each month and pay it off in full in the following months, again establishing a pattern of good credit behaviour. Alternatively you can take out a small loan and do the same thing, ensuring you meet all the payments in full, preferably paying more than the required minimum amount.

To be accepted for a low rate credit card, you need a good credit rating, and a good rating takes work. If you are prepared to build things up slowly then everything should be fine. One word of warning, though. If you get to the point where you feel you are ready to apply for a card and are turned down, don't apply for another immediately with a different company. The referencing agencies also monitor when you are accepted and declined and being declined over and over does not reflect well on your credit rating. Simply carry on working on your credit rating and try again after three months.

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