Applying for a credit card without checking your credit score could lead to unnecessary rejections or higher interest rates. According to Birmingham Mail, financial experts are urging consumers to consider spending a small amount—around £14—to assess their creditworthiness before applying for a new card.
Why checking your credit score matters
Credit reference agencies, such as Experian, TransUnion, and Equifax, offer credit score checks that help individuals understand their likelihood of approval before submitting an application. A rejected credit card application can negatively affect a credit score, making future approvals more difficult.
Some services provide free trials for credit score checks, but they may begin charging a fee after the trial period. For instance, Equifax offers a 30-day free trial, after which users are charged £14.95 per month.
The impact of choosing the right credit card
Different types of credit cards cater to specific financial needs. According to experts, selecting the right card can help improve financial stability:
- Credit builder cards are useful for individuals with a limited credit history.
- Reward cards offer benefits such as cashback or travel points.
- Balance transfer cards help consolidate debt at lower interest rates.
Additionally, some 0% interest credit cards allow users to spread payments over time without accumulating interest, which can be beneficial for those managing outstanding balances.
A credit card with an interest-free period ensures that more of your payments go towards repaying the original amount borrowed rather than interest, making it an effective way to reduce financial burden.
Understanding APR and how it affects repayments
The Annual Percentage Rate (APR) determines how much extra a borrower will pay over time. For example, if someone borrows £500 at a 10% APR, they will repay £550 over a year. Choosing a card with a lower APR can lead to significant savings.
Martin Moore, a borrowing expert at NatWest, advises that some consumers divide the cost of their purchases by the number of months remaining on their interest-free period to ensure they fully clear their balance before interest kicks in. This approach helps prevent unnecessary debt accumulation.
Why credit scores are not the only factor lenders consider
Financial expert Martin Lewis warns against relying solely on credit scores when applying for credit. While many portray credit scores as the ultimate measure of creditworthiness, lenders actually use their own criteria.
“Too many places portray your credit score as the be-all and end-all. It isn’t. It’s just an example of how a lender may assess your credit history. Each lender scores you differently based on its own profitability wish list and factors not on your credit file, such as your income.”
This is why MoneySavingExpert has introduced the MSE Eligibility Rating, which provides a broader view of approval likelihood, taking into account a lender’s internal assessment criteria.
