Credit scoring can affect the rate offered by credit card companies
Those looking for a credit card will often find that their credit scoring will affect the type of deal they are offered.
More from Credit Rating
6 December 2009
Credit scoring is how a lender such as a credit card company rates potential customers and their history with loans. Someone who has not paid their mobile phone bill or loan payments on time in the past may have a poorer credit score because they may be judged to be less reliable when it comes to paying bills of any nature on time. That is why it is always important to pay your credit card bill on time, paying off at least the minimum amount each month.
Those who do have a good credit scoring are more likely to be offered the advertised interest rate on a credit card, rather than a higher rate.
They could, for example, be offered 15.9% APR variable on the MBNA Platinum plus credit card. Holders of this type of card can also benefit from 0% on balance transfers for 13 months, so long as the balance is transferred within 90 days of account opening, with a 2.9% handling fee. Money transfers on the credit card are also charged at 0% for 13 months with a 4% handling fee, if the money is transferred within 90 days. Those with a lower credit scoring may be offered a rate lower than the one advertised.
However, not all lenders may have the same attitude to credit scoring. Different companies may be looking for different things so looking unattractive to one lender does not necessarily mean someone will look unattractive to all lenders.
Those considering applying for a credit card can apply ahead of time to an agency such as Experian, Equifax or Callcredit, which can tell them what credit history credit card companies can gain access to. Other factors likely to improve someone\'s credit rating include being signed up to the electoral register, having the same home address and employer for a significant amount of time and having a landline as opposed to just a mobile number.
For people who know they have a poor credit scoring and are unlikely to be offered one of the most popular credit cards, there are cards that can help them build up their credit rating. Capital One, for example, offers the Capital One Classic credit card. This has a rate of 34.9%, but this rate can be reduced once holders have shown they can manage their account responsibly and pay off bills on time. Holders can also apply for email alerts to help them stay in control of their finances and can be offered a low, easy-to-manage credit limit from £100. Those considering the Capital One Classic credit card are more likely to be accepted if they are on the electoral roll and are over 18.
Another option for those with a low credit scoring is a prepaid credit card. These do not require a credit history as they must be preloaded with money before they can be used for payments, so it is impossible to get into debt when using them. The cards work in much the same way as a traditional credit card; they can be used for in-store payments using a chip and pin device, or for shopping online.
The O2 Cash Manager Prepaid Card is one of the best on the market since it is available free of charge with no set up cost. However, it is only available to O2 customers. Another option is the Freedom PAYG PrePaid MasterCard, which costs £9.99 with no service fee.
