Pre-paid cards ‘help people budget’
September 18, 2007 by admin
Filed under News, News-Credit-Cards
Using pre-paid cards instead of credit cards can help people to budget more accurately, as well as being convenient and secure.
That’s according to Mark Simon, chief executive of card provider Tuxedo, which is teaming up with the Sun and Newcastle Building Society to launch a pre-paid card.
“There is no credit involved and as a result there is no risk of going over-drawn and there is no risk of incurring credit costs,” he said. “It allows people to plan and control their finances according to the credit they have.”
Because buying online requires a credit card, pre-paid cards offer a secure and simple way for consumers to purchase via the internet as well as on the high street, Mr Simon said.
“You’re putting money on a card which is very convenient and secure but also using it for payments online and offline,” he explained. “It really offers the customer … convenience and, crucially, security.”
Such a card could be especially useful for people with a poor credit rating. “This is absolutely for them because they can spend money they have and they don’t have to incur credit exposure,” Mr Simon said.
Bad Credit-Credit Cards
November 3, 2006 by admin
Filed under Credit Cards
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In the red and on the blacklist
What is bad credit, how do you become somebody who has bad credit and how does it affect your daily life? How do you get a credit card even if you are on the credit blacklist? There are ways and means…
The cost of credit repair
If you are refused a mortgage, a loan or even a credit card it may be that you are regarded as either a bad risk or that the lender can’t see how they will make money from you, which, when it comes down to it, is the same thing.
But I haven’t done anything!
When you apply for any kind of loan the company you are approaching conducts what is called a credit check. Every time you have enquired about finance it has been recorded on a central database and lenders access this database to see how well you repaid your loans and any other debt management you have exercised.
If you have missed a few payments on a loan, defaulted on a mortgage for whatever reason, or perhaps failed to pay household bills on time, it will be recorded and quite often the criteria lenders use to assess whether you are a good or bad risk will count these things against you.
Squeaky clean
Strangely enough even if you have lived a squeaky clean financial existence and never had a credit card or defaulted on any payments or perhaps you haven’t had a large repayment to make before, this can all sometimes add up to an equally bad risk in the lenders assessment. This is because they have no data on which to assess you; there will be no record of how you may respond to the credit you are now applying for. So they refuse you credit altogether.
A quarter of adults
It’s reckoned that one in four adults have had some form of bad credit rating at some point in their lives. The good news is it can be changed. One way of changing your credit rating for the better is with a bad credit-credit card.
How much!
The problem with bad credit-credit cards is they tend to be expensive. The APR you will normally find on these cards can be up around 30percent.
But as you are determined to improve your credit rating and this is why you have taken out one of these cards it doesn’t really matter because you will be paying off the full balance each month and thereby avoid actually paying the high interest rate…won’t you?
Shop around
It is always worth shopping around for the lowest rate you can get, just in case there is a month or two where you simply can’t pay everything off. And above all, don’t overstretch yourself! Just because you have credit doesn’t mean you have to use it!
Keeping it real and avoiding the debt trap
Once you have your card it is really important to make sure you use it properly. If necessary you should set up direct debits from your bank account well before the payment due date so you always pay off at least the minimum payment each month.
The secret to improving your credit rating is to make regular payments and thereby demonstrate your reliability. But remember, paying off the minimum each month will incur compound interest, (interest on interest) at very high rates too. The last thing you want is to fall into the debt trap.
A capital card
The Capital One Classic Credit Card is currently available to people who have a bad credit rating. As you might expect, it has a limited credit ceiling of between £200 and £2,500, but with time it is likely to increase as you demonstrate good management of your debts. The APR is a whacking 29.9% so you really want to avoid paying interest if you possibly can.
Hopefully a card like this would help you walk away from being amongst this country’s one in four with a poor credit rating.
More Information:
- Credit card articles – some great articles from the Card Guide
- Applying For Credit Cards When You Have Bad Credit
- Using Your Credit Card To Build Credit History
- CCCS – Free non profit association advice
- APACS information page
Credit Building Tactics
November 3, 2006 by admin
Filed under Credit Cards
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Your Credit Rating and you
There are two main credit rating agencies in the UK: Experian and Equifax.
When credit card companies receive an application for a card they will more than likely run the person’s details past one of these two agencies. It’s the job of these agencies and others like them, to keep on file all applications for credit, whether or not you were successful and details of how you conducted your dealings with debtors when you had that credit.
This information includes your mortgage payments, sometimes it includes utility bills and it can even take into account the area in which you live and whether you are on the electoral roll. The lender will compare the data it receives back from the rating agency with its selection criteria to build up a points profile of you as a potential risk. If you don’t score enough points you are considered to be a bad risk or have a low credit rating.
Don’t Panic
If you are turned down by a lender it’s possible to find out what your credit rating is by writing to the agency enclosing payment for £2.00 and asking to see a copy of your file. Or apply online at one of the numerous websites offering the service.
If you do have a low rating, don’t panic! You can improve it. Here’s how.
Start slowly
By initially getting a credit card designed of people with a poor credit rating you can start to make regular payments into it. These payments should be fairly large and the best thing is to pay them off in full each month.
If you can and you feel like playing the credit ratings agencies at the top of the game, then you can go one stage further. Sometimes loan companies will refuse you credit if it appears from your history that they won’t be able to make money out of you. So for the hell of it you might want to leave a bit in the card for them to nibble at with their interest charges. But whatever you do, don’t leave too much in there as the APR could be soon become crippling.
And remember, you don’t need to do this every month – clear the balance more often than you leave a little for them. What you are doing is demonstrating that you can look after your finances by working the credit card.
Careful does it
The above method should really be called the kamikaze school of credit improvement and it’s not guaranteed to make a difference with all lenders. It requires you to be very self disciplined and if you’re the sort of person that might get carried away with spending or be just too lazy to control your repayments you probably shouldn’t go near this approach.
The building blocks of credit
Instead you could start to build up your credit rating by co-signing with a family member or a good friend on a small loan or credit card. But be aware of
the potential pitfalls of signing up to a joint debt if you fall out with your
co-signee! This is a good building block for young people who are starting out on their journey into credit.
It’s all over
Once it’s all over and your credit rating improves you will quickly get another card. When it arrives, play the game the usual way and give the credit card companies as little as possible!
Whatever you do don’t forget to meet your monthly repayments on any bills you have or your rating will go sliding again. If you do find you’ve forgotten a repayment, contact the company, get them to make a note that you have contacted them and pay it as soon as possible.
If you move house, tell all financial institutions you are involved with and make sure you register on the electoral roll of the new area.
Applications
Every time you make an enquiry about credit it’s recorded on your rating file. So if you are turned down by a company it will be shown. For this reason it is a good idea to avoid making several applications to different companies if you are turned down by one. Given that it only costs around £2 to find out how your rating stands it would be better to get a copy of your rating from the agency before filling in more applications.
Alternatively simply phone the company before applying and ask them if you fit the credit profile they will want; are you the sort of person they will accept? A quick conversation could do you and your credit history a world of good.
Buying time
A little patience is needed before your credit rating gets going, but while you’re waiting for things to start moving you can help them along by getting a few scorecards, but always pay off the balance on a regular basis as these are usually the most expensive type of credit facilities out there. So don’t go grabbing scorecards for things that you don’t already buy, or you’ll end up in a financial nightmare of spiralling debt.
And finally…
Whatever you do, when you get the credit card that you really want, don’t go over your credit limit. You’ll be charged an outrageous sum for the privilege and you guessed it, it will go on your credit rating file.
Be safe, follow good practice and get rid of all those scorecards and close down your original credit account at least until you have got used to handling credit again or if it’s for the first time until you can recognise how you might respond to the temptation of the card!
More Information:
- Credit Card Advice – CreditCards121 advice section
- Credit Reports
Every time a customer applies for a financial product such as a credit card, the credit company will consult that customer’s credit file. This file records all their financial activity in terms of credit applications and banking activity. - CCCS – Free non profit association advice
- APACS information page
