Credit scores can be tricky to understand, but that doesn’t mean that it won’t impact your daily life and wellbeing. A poor credit score can prevent you from getting the home or business loan you need, or force you to pay higher interest rates on other debts. In certain cases, it can even prevent you from getting the job you applied for. This makes it all the more important to understand your credit score and to check it ever so often to make sure you are in good standing.
What Is A Credit Score?
In the UK, your credit score is a number that reflects how trustworthy of a borrower you are, and lenders will take this into account when deciding to approve you for new lines of credit. There are three main Credit Reference Agencies (CRAs) that are responsible for tracking your credit score depending on how well you pay off your debt. Those three CRAs are Equifax, TransUnion, and Experian, and they will provide you a credit report that includes information like your name, current and previous home addresses, current credit accounts, public decree information like County Court Judgements, electoral registry, previous fraud or stolen identities. Banks or credit card companies aren’t the only people who might take a look into your credit score. Employers, landlords, mail order companies, or telephone companies also might check your credit to see if you are trustworthy for them to write you a contract or employ you.
Sometimes small mistakes lead to another or you simply cannot pay off the debt you may owe, so your credit score takes a punch. However, there are ways to improve your bad credit score, and one way is to apply for credit cards that are designed for people with poor credit. So you do have a chance to rebuild your credit.
How Can Credit Cards Help?
While there are many ways you can build your credit score, credit cards are an easy and simple option. Lenders like to see you have multiple credit accounts since it shows that other lenders trust you. It also lets you start writing your payment history (which is absolutely crucial in determining your credit score). When you open a new credit card account, you’ll have to start paying it off and lenders will keep track if you’re paying on time. If you’re responsible and regularly pay your credit card bills, your credit score will improve and the longer payment history you have, the better.
What Should You Keep In Mind For When You Apply?
There are a lot of different credit cards out there, and a lot that are made especially for individuals who are looking to improve their low credit scores. You will want to keep these factors in mind when you’re applying for a new credit card to rebuild your credit.
1. Credit Score Requirements
Before you apply, you should check if the particular credit card requires you to have a high credit score. There are plenty of cards out there that allow low or poor credit scores, and there’s even some cards that don’t even look at your credit score. These credit cards are made for people who are trying to rebuild their credit or even just starting out with their first card.
2. Allows History of Bankruptcies
Other credit cards out there might not approve you if you have previous bankruptcies during a certain given time frame. You’ll want to check if the card you are applying for has this requirement. Some credit cards might not even take this into consideration.
3. County Court Judgements (CCJ’s)
You can get a CCJ if someone like a bank or lender takes court action against you, saying that you owe them money. CCJ’s can stay on your record for up to 6 years. Certain credit cards out there will not accept your application if you have CCJ’s on your record. You’ll want to keep this in mind and check if the credit card you want will allow CCJ’s.
4. Other Recent Credit Card Applications
If you apply too frequently or recently applied but was not approved for a credit card, this is a red flag to credit card companies. It indicates that you might not be in the best credit standing and not a trustworthy borrower. Some credit cards will state that they will not approve you if you recently applied for a credit card with a different bank or company. Be sure to check if the card you plan on applying to allows previous applications.
You should know that a low credit score is not the end of the world. There are ways to rebuild your credit, like applying for credit cards that are for individuals with bad credit. It’s important to understand how your credit score works so you know the best practices to become financially responsible.
Resources:
1. https://www.moneyadviceservice.org.uk/en/articles/how-to-check-your-credit-report
2. https://www.money.co.uk/credit-cards/bad-credit-credit-cards.htm?track=885076&gclid=EAIaIQobChMI-aGX0c_44gIVjsBkCh1K_gZzEAAYASAAEgJ-QfD_BwE
3. https://www.moneyadviceservice.org.uk/en/articles/credit-cards
4. https://www.uswitch.com/credit-cards/bad-credit-credit-cards/
5. https://www.gov.uk/county-court-judgments-ccj-for-debt
