A good credit score means you’ve got access to mega useful products such as a 0% balance transfer credit card – a great place to park lingering debts while you pay them off.
Ditto getting the thumbs up on a cheap personal loan with regular fixed payments.
But what if your credit score isn’t up to scratch? Would that mean you’d have no hope of getting the deal you’re after?
Thankfully not – but you might need to carry out a few repairs to set things straight.
What’s the problem?
When it comes to credit-based products such as credit cards and loans, banks will simply reject your application if you fail to meet their lending criteria.
And if you rack up a raft of rejections, it could further damage your chances of being accepted elsewhere.
Improve your chance of success
Rejected applications leave black marks on credit files.
These are maintained by credit reference agencies and used by lenders to help them make decisions about prospective customers.
So here’s a 10-point action plan to increasing your chances of being accepted for a low-rate loan or balance transfer card.
1. Search smart with SmartSearch
It’s easy to say you should only apply for deals you’re likely to get. But how do you know which ones they are?
The best way is to use MoneySuperMarket’s SmartSearch credit profiling tool, which is an option you can click on when you look at a credit card on our site.
“SmartSearch reveals the credit cards you have the best chance of getting – and it does it without leaving a footprint on your credit file,” says Kevin Mountford.
2. Go easy on those applications
Making multiple applications in a short space of time is likely to have an adverse impact on your credit file.
It makes you look a bit desperate – even if you’re not – and lenders don’t want customers in desperate situations.
So if you receive a rejection, don’t apply elsewhere until you’ve checked your credit report.
3. Check your report
You can find out what’s on your credit file and correct any mistakes that might be turning lenders against you.
The main agencies are Experian, Equifax and Call Credit.
Reports cost just £2 each if you only want a statutory copy which you can get from the agencies direct or you can look at our credit monitoring channel to see more indepth options.
Either way, seeing your report means you can get errors put right.
Make sure that any changes to your circumstances – redundancy, divorce, etc – are noted, along with settlements of any old debts such as County Court Judgments.
You can even place a Notice of Correction on your credit file explaining the background to any arrears, for example that you missed payments because you were ill.
4. Register to vote
Most companies use the Electoral Roll to combat identity fraud.
If you’re not on it at your current address, you risk being rejected due to fraud concerns.
It’s easy to register: just contact your local authority or sign up online.
5. Close unused accounts
You know that old credit card hanging around in your wallet? It could be the reason your application for a new card is turned down.
Lenders look at the total amount of credit available to you, and they start to fret if you’ve got a lot of unused credit lying around – there’s always the chance you could suddenly use it and subsequently struggle to pay off all your debts, including what you owe them.
So close any old accounts you no longer use unless that card comes with benefits you don’t want to lose.
6. Pay on time
Missing a payment date is one of the best ways to scupper your chances of being accepted for credit.
After all, what lender wants a customer they can’t trust to pay on time?
Setting up a direct debit or standing order to cover your bills is a good way to avoid mistakes.
If you are struggling to pay, contact the company involved before the payment date so it’s not a shock to their system.
7. Don’t over-extend yourself
Maxing out your credit card can indicate to lenders that you are in trouble financially.
It also makes it much more likely that you will exceed your limit – and be charged accordingly.
To be safe, it is therefore sensible to only borrow up to 30% of your overall credit limit at any one time.
8. Be open and accurate
Always complete applications for credit accurately and honestly.
Lies will often come out and lead to your application being declined.
9. Build a credit history
Borrowing too much is not a wise move if you want to be accepted for the best credit cards and loans.
But not borrowing enough can also work against you.
Lenders use your credit file to check you are capable of meeting payment terms. So having no or little credit history can prove a problem.
Ways to build one include opening a bank account, taking out a normal credit card that you pay off in full every month, and using a contract mobile phone – again paying your bills on time and by direct debit if possible.
10. Demonstrate stability
Banks feel safer lending to people who are “safe and secure”.
So staying at the same address, sticking with the same job and using the same bank can all work in your favour.
In other words, don’t switch banks just before asking for a loan, and don’t apply for a credit card just after moving house.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.