Rating your credit potential

By Sophie Wright

As low rate credit cards are amongst the most difficult type of card to be accepted for, it is worth looking at how your credit ratings can affect a decision. The "Credit Crunch" is making credit card applications 20% more likely to be rejected than six months ago, and this figure is rising. In the future, credit card companies may even begin to cut back on their low rate cards as they try to make more profit for their shareholders in this difficult time.

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.

When you apply for a credit card the bank offering the card will take a good look at your credit history, more commonly known as your credit 'rating'. The word rating is misleading because it implies a score of some type. Your credit history is a lot more than just a number. Your credit rating is held by three main credit-referencing agencies, specialising in monitoring people's financial 'character'. This report provides information on repayments that you made or missed, your credit limits, when you applied for cards and other relevant information. The decision to issue you with a credit card will depend on the report the credit card company receives from the referencing agencies.

To maximise your chances of being accepted for credit, there are a number of things you can do. You need to make sure that you make any repayments to existing creditors on time. If you are making credit card repayments then you could also ensure that you pay more than the minimum monthly amount. You can also actively improve your credit rating by applying for easily obtainable credit such as store cards, buy an item each month, and then pay off the balance in full each month. Another way is get a small loan and meet the regular repayments. If you apply for a credit card and are rejected, don't apply for another one immediately, as this has an adverse affect on your rating. Instead, work at improving your credit rating and wait at least three months before you apply for another card.

If you find that your credit history is less than glowing then don't panic - there are a number of things that you can do to improve it. As credit reference agencies monitor the way you handle credit, the best way to improve it is to deal successfully with other types of credit. For example you can apply for a store card and use it frequently, paying the balance off in full each month. Or you could take out a small loan. You have to prove yourself to be a model customer. As a result, you are more likely to be accepted for other cards in future.

Low rate credit cards are on the decline but they haven't disappeared completely. If you want one of these cards then you are going to need to work hard to improve your credit rating. If you work on your rating for a while and then apply for a card you may well find yourself being accepted. However, if you are rejected, do not apply for a card with a different provider immediately, as being declined is also recorded and can harm your credit rating. Work on your credit rating some more and apply again in three months time, when you have a better chance of being accepted.

About the Author:

Sophie Wright is a financial researcher specialising in UK Card offers and is keen to create awareness about the offers availble to consumers by using compare credit card sites.