Should I get the Lowest Interest Credit Card?

Should I get the Lowest Interest Credit Card?

It might seem really obvious that the lowest interest credit card will be the best. However, credit cards are used differently by different people and so the type of card you get will very much depend on what type of spender you are. So, consider each of the types and think about which will be the best for you.

Zero interest card
A zero interest credit card will not charge you any interest. They are quite rare but can still be found if you look hard enough. I might seem like these would be the very best types to get as you pay no interest as all but there are some things to watch out for. If you want to do a transfer form your existing credit card to the zero-interest card then there may be fees for this. It may even be that the zero interest is only on new purchases and not on transferred balances so check for this.

You also need to be aware that the zero interest will only be for certain time period. This tends to be for a few months up to a year. Once this time has finished you will move onto a variable interest rate which can be very high. It can therefore be wise to use these cards in a specific way. Use the cards to buy everything that you need during the free interest period making sure you set up a direct debit to repay any money that they insist on (there is likely to be a minimum payment that you have to pay) While you are spending, make sure that you put money into a savings account to cover what you are spending on the card. Then when the zero-interest period is up you can repay the card with the money in your savings account. You will gain the interest on the money in the savings account and not pay any interest on the card. If you think that there is any risk that you will not be able to make the repayment at the end of the zero-interest period then it will be wise to not have this sort of card.

Low interest card
There are some cards which offer lower interest compared with others. These tend to be on a variable rate so do keep checking and make sure that you are not paying more than you have to. These cards are probably best suited to people who do not repay their credit card in full each month. Although it is best to do this, there are those people that know they will not and therefore they will be charged interest on the card. This will be cheaper if they use a card with a low interest rate.

Just because you have a card with a low interest rate though, does not mean that you should keep spending on it without any thought. You will still be paying interest on the amount that you are borrowing so try to keep that to a minimum if you can. Remember that you do not have to only repay the minimum or the whole balance, you can pay a bit more than the minimum off each month or pop in lump sum payments when you can afford to in order to lower the debt.

Rewards card
Rewards cards tend to have higher interest which means that they are not good for anyone that is not going to repay their whole balance each month. This is because they will end up paying more than they get in return for the reward. It is much better to therefore just go for a card with lower interest. If you always pay off the full balance of the credit card then this can suit you, although it is wise to make sure that you set up a direct debit in order to repay it automatically so there is no risk that you will forget. You also need to make sure that you choose the right rewards card as you will need to choose a reward that will be useful to you. You might be rewarded with cash, vouchers or credits and so you need to see what different cards have on offer and what you would like to have. You will find that the rewards are very small. You will get a higher reward if you use the card more and you need to be wary of that. Try to only use the card as much as you normally would and make sure that you can afford to repay what you spend. It can be tempting to spend more because you are getting more of a reward but this is not wise. You will need to pay out a lot more just to get a very small amount back. See the reward as a bonus not a salary and you should be able to just spend what you normally would and gain from it.

How Will be Being Turned Down for a Loan Affect my Credit Score?

How Will be Being Turned Down for a Loan Affect my Credit Score?

Some of us may find that when we apply for loans we get turned down. This could be for a number of reasons. However, if we then try applying for another loan from another company we may be turned down as well. We may hear that if we keep being turned down it will affect our credit score. It is worth understanding what your credit score is, why applying for lots of loans might be a problem and what to do about it.

What is my Credit Score?
Each of us has a credit report which has details or the loans that we have as well as regular payments that we are committed to such as mobile phone contracts. This information will allow lenders and other people who rely on you making regular payments, to see whether they think that you are worth the risk. They will be able to see whether you have ever missed payments or repayments and if you have any CCJ’s against you for not paying what you owed. They will use this information to calculate whether they would like to lend to you and if so, how much interest to charge you. If they think you are a big risk, they may not lend to you at all or they may lend to you but at a high interest rate.

It is worth looking at your credit score and you will then not only be able to check the information is correct and report any that is not but you will also be able to see whether it looks likely that you will be able to borrow money. You could see what you might need to improve as well in order to get a better score.

Applying for Loans
When you apply for a loan this information is recorded on your credit statement. If you are successful then that is fine as long as you make the repayments on time. If you get rejected for the loan then this is noted and every time you get rejected it is noted. Other lenders that you apply to will see that you have been rejected and this could make them feel that there is a reason to reject you as well, just because someone else has. They may feel that if another lender thought you were too risky then they will too. The more rejections you have the worse it will look and the less likely you are to get a loan.

This means that you need to do your best to improve your credit score and therefore increase your chance of being accepted for a loan. In some cases you may be even guaranteed to get one. This could seem tricky but it does not have to be.

The first tip is to not apply for a loan unless you are sure that you will be accepted. This might seem odd as you may not think you know whether you will be accepted or not. However, you could content the lender and ask them whether you are likely to be accepted or not or what their criteria are for accepting borrowers. Some lenders have an app where you can even look at what your chances of success will be, which can be very handy. You might find that when you check your credit score you will also get this sort of information.

You will also need to work on improving your credit score in order to be more likely to be accepted. Making sure that you make all of your repayments on time and all of your regular payments can be a really good start towards this. If you have lots of debts then paying some of them off could also be worthwhile. Things like an overdraft or credit card do not have regular monthly repayments and so you may just be paying back a little bit each month. It is therefore wise to think about whether you will be able to repay a bit more each month. Think about whether you can reduce your spending or increase your income so that you will be able to do this. As you whittle away this debt you will find that your credit rating improves. In the meantime, it is sensible to not apply for any more loans. Wait until your score is better and check again once you have worked on it to see whether lenders might be happy to lend to you before you make a formal application. This will show on your credit report but hopefully it will be accepted and then it could even improve your chances of getting other credit.

It may also be best for a significant amount of time before applying again. You will need lenders to see that you have been making a good progress with repayments and that it has been a while since you applied as they will then be more likely to lend you some money.