The problem is, it’s often very difficult to know in advance whether or not your application is likely to be accepted. However, it is becoming easier.
Some credit card providers, such as Barclaycard and Capital One, provide the eligibility criteria for specific products. They also clearly state who the product is aimed at. Capital One’s Platinum Card, for example, offers a low balance transfer rate of 6.9% with no transfer fee until January 2012 – a highly attractive deal – but it’s only available to those with an “excellent credit rating”.
And Barclaycard has taken this a step further with the launch of a new service, Let Me Choose, which is a pre-application check that helps you find out whether or not you’re likely to qualify for one of its credit cards. Yet it doesn’t show up on your credit rating, so if you won’t qualify you won’t have made an unnecessary application that could affect your ability to access credit in the future.
You enter your details, such as your salary and address, and it shows you a range of cards and the likelihood of you being eligible for them.
Amer Sajed, Chief Executive, Barclaycard UK, said: "Consumers currently need to apply in full for a credit card in the UK, without knowing whether they are likely to be accepted or not, leaving a search on their credit file which can potentially have a negative impact on their credit rating.”
How’s your credit?
Obviously, at the moment, Barclaycard is the only provider offering this facility but that doesn’t mean that all other applications should be made blind.
Don’t forget, it’s very easy to find out what your credit rating looks like – you can see the same information the credit card companies can. Firms like Equifax and Experian charge just a few pounds to see what’s on your record.
Forewarned is forearmed and it’s also a good chance to check for inaccuracies and have them put right.
It’s also worth using moneysupermarket.com’s Smart Search to help you identify which deals you’re likely to qualify for. It doesn’t check your credit file but instead asks a range of questions to gauge whether you have a good, fair or poor credit rating.
What’s on offer and who to?
Until other credit card providers follow suit and offer more guidance on the kind of customer that will qualify, people will simply have to exercise their judgement on what deals they can safely apply for.
However, it’s possible to talk more generally about what sort of customer the various types of card are aimed at. Here’s a breakdown of what to expect.
At the top of the ratings
So, you’re a sensible and careful credit user, with a long, positive credit history. Lucky you – providers want to cherry pick customers like this and are offering some excellent deals.
For example, the American Express Platinum Cashback card rewards spenders with an incredible 5% cashback for the first three months, up to a maximum spend on £2,000. The cashback rate then drops to 0.5% on the next £3,500 spent on the card, rising to 1.0% on spending between £3,500 and £7,500 and 1.25% on any spending above £7,500.
If you plan to pay off the balance at the end of each month then this is a great card. But of course, with an annual percentage rate (APR) of 19.9%, any cashback would be quickly cancelled out by your interest payments if you don’t clear your balance in full.
Perhaps you have some existing debt and want to move it to a cheaper home while you pay it off. If that’s the case, the Virgin Credit Card could be just what you need. It has a 16-month interest-free period on balance transfers, although you will pay a 2.98% fee.
Maybe you’d rather take advantage of your strong credit position to grab a lifetime low rate. The Barclaycard Simplicity charges just 6.8% on purchases and balance transfers and doesn’t charge a fee for moving balances onto it.
There are cards out there offering 0% on balance transfers for an introductory period, which may be better if you have debt you could clear in that time. However, the Barclaycard Simplicity is an excellent option if you think it will take longer to pay off your debt.
Balance transfers are charged at 15.9%, so there are better options if you have existing debt.
Do you have a lower credit rating?
If your credit history isn’t perfect you won’t be accepted for any of the deals mentioned above but there are cards which can help you restore or build up a better credit rating.
There are cards that target these sorts of borrowers, such as the Capital One Classic at 34.9%, or the Vanquis Visa Card at 39.9%. The rates are high, so we recommend using them as credit builders – spending with them and then repaying the cash each month in order to strengthen your credit score.
Alternatively, Barclaycard Initial charges 27.9% APR and is aimed specifically at people wanting their first credit card or who have been declined a card in the last 12 months.
Of course, that doesn’t mean that just anyone will qualify, the provider won’t accept anyone who has missed multiple payments on a card in the last year or who has an income of less than £10,000.
In the middle
Of course, many people are somewhere in the middle and it can be particularly hard for them to work out what sort of deals they might qualify for. It’s a really good idea to take a look at your credit score to give you a clearer picture of how lenders will view you.
You can also make use of our Smart Search tool, which leaves no trace on your credit record but shows you the sorts of deals you are likely to qualify for.