For the millions of consumers in the UK with bad credit and no credit, getting approved for a major credit card takes a tremendous amount of effort and time. Unfortunately, establishing credit is as equally challenging as re-establishing or rebuilding credit. Creditors and credit card companies consider both types of people as risky applicants, and in these challenging times, credit card companies are now more than ever checking the applicants credit worthiness. Thus, they are less eager to extend a line of credit. However, there are ways to get around these problems. Credit cards designed to build and re-build credit are intended to make it easier for some to obtain credit. Barclaycard and Vanquis both have credit cards designed to help.
The Importance of Establishing a Good Credit History
Even with poor credit, you will be able to finance many purchases such as a home or vehicle. However, good credit has certain advantages. Those with a high credit score receive prime rates on home loans and auto loans. For some, low rates may not be a huge deal. Yet, low interest rates on loans can potentially save you hundreds each month. Moreover, having good credit unlocks the door to better financing alternatives.
Similarities Between Having No Credit and Bad Credit
Unfair as it may be, some lenders group those with no credit and individuals with poor credit into the same category. This makes it harder for young people and those trying to establish credit. Individuals with poor credit made certain mistakes that justify a lender's reluctance. On the other hand, those with no credit history have zero credit mistakes. So, why do some lenders deny credit to those with no credit history? In a nutshell, before granting a credit card or loan, lenders will review credit reports to examine past relationships with other creditors. It's a way to determine an applicant's likelihood of repaying funds. If you have no credit history, lenders become uncertain. Instead of taking a gamble, they rather deny an application.
Getting Approved for a Bad Credit Credit Card
Getting approved for a bad credit credit card is easy. The tricky part is finding a lender that specializes in this sort of credit. Use the internet to your advantage. Many bad credit credit card lenders offer online applications and instant approvals. If you are hoping to build a good credit history, this is one of the easiest approaches. There are two types of bad credit credit cards. If you are approved for an unsecured card, you may receive an initial low credit limit. However, as you maintain regular payments, the creditor may gradually increase the spending limit. With a secured credit card, applicants must open a saving account with the lender. In the event that you decide to stop making payments, this account serves as collateral.
Credit Scores and Rebuilding your Credit History
A credit score reflects credit payment patterns over time, with more emphasis on recent information. Ways to improve a credit score generally include the following:
. Pay your bills on time. Delinquent payments and collections can have a major negative impact on a credit score.
. Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a credit score.
. Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix. It probably won't improve your credit score.
. Pay off debt rather than moving it around. Also, don't close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.
