If you make an application for credit and are rejected, it can have a negative impact on your credit record. Here's a useful new way to avoid that fate....
If you've ever been turned down for a credit card or other financial product you've no doubt felt frustrated, confused or just plain annoyed - why on earth were you turned down?
Since the credit crunch lenders have become pickier about whom they will lend money too, applying increasingly stringent criteria. And as we all know, a good deal of their information is obtained from credit agencies - companies that hold details of our financial dealings.
Hard footprints
Whenever we apply for a financial product, the lender involved carries out a credit search (which essentially gives them an idea of how likely they are to get their money back).
However, these searches leave so-called "hard footprints" on your credit record. When you come to apply for credit again, future lenders can see if you've been turned down in the past - and on the strength of this decide to offer you a more expensive deal than the one you've applied for, if indeed they make you an offer at all.
And too many failed applications in a short space of time can create a cluster of hard footprints which could scare future lenders off as you look desperate for credit. Yikes.
Pre-application check
But that may be about to change. Barclaycard has launched an innovative "Pre-application check" which claims to tell us within one minute whether we would be accepted by the company for credit.
And the best bit is it won't leave a hard footprint on your credit record (instead it leaves only a "search footprint" that shows your information has been accessed). So you should be able to see how likely you are to be approved a Barclaycard credit card, whilst not affecting your ability to get credit in the future.
I decided to check it out, to see whether it was truly as good as it sounded.
How does it work
So what does the check entail? Well I took a look at the site and discovered that after entering your personal details you must then enter your employment status, pre-tax earnings, whether you're a Barclays' customer and how you intend to use the card (whether it's for a balance transfer, to make purchases or to earn rewards on purchases).
Enter the details, click "submit" and you should receive a result within seconds.
Results
Depending on the type of card you're interested in, Barclaycard will tell you the percentage likelihood of you being accepted, should you choose to apply for it.
Pros
Sounds great, doesn't it? Being able to check how likely you are to be accepted (or declined), should you apply for a certain credit card while not damaging your credit record is fantastic. And as Barclaycard has a bit of a reputation for declining many applicants this could save a lot of heartache.
What's more, as it's free you could use it to give you an idea of how likely you are to be accepted for a similar card from another provider.
Cons
However, this is not as cut and dried as it may seem.
For a start there are three main credit agencies, Experian, Call Credit and Equifax, each of whom hold slightly different information on us. So while getting credit through some lenders may be easy, as they use one agency, you could find an almost identical application through another lender could fail as it uses a different company.
The Barclaycard check could therefore tell you how likely you are to be accepted for its balance transfer card, but apply for a similar card from a different lender (which uses a different credit agency) and you could find yourself declined.
Incidentally, I gave Barclaycard a ring and found that the credit agency it uses for the check is Call Credit.
Additionally, even if your result shows a high percentage chance of being accepted for one of Barclaycard's top cards, this doesn't guarantee success.
Barclaycard
Of course, if you were planning to apply for a Barclaycard it's well worth taking the check.
However, the cards the lender has on the market at the moment are far from inspiring. The Barclaycard Platinum card (offering 0% for 12 months on balance transfers, subject to a 2.5% fee) appears to be the only card in the pack to offer anything near a market leading deal.
I was also disappointed to find when I tried to apply for the credit check myself that it seemed to be suffering some problems as I couldn't obtain a result. My opinion therefore is that while in principle this is a useful service it is one that should be used with an element of caution.
Improve your credit rating
But whether or not the Barclaycard check appeals to you, keeping your credit record as blemish-free as possible should be something we are all concerned with. So if you should receive a disappointing result from the Barclaycard check, or you just wish to improve your credit rating, here are a few things you can do:
- Make sure you're on the electoral roll
All of the credit agencies use this information so it is critical to be on the electoral roll.
- Cancel unused credit cards
Unused cards make lenders twitchy - especially if high credit limits give you the ability to go on a major spending spree at a moment's notice. Cancel any you don't use.
- Pay on time
Even one missed credit card/bill payment can affect your credit rating so make sure you make that monthly payment on time (preferably by direct debit).
- Don't keep applying
If you are turned down for credit, it's best to apply for your credit report from the three main credit agencies to find out why before applying (and risking refusal) again.
- Check your report
You can check your credit report for free via lovemoney.com. It's worth applying for a copy of your credit reports every 6 months to check the information held is accurate (you can apply for a notice of correction for any inaccuracies).
- Don't make too many credit applications
Finally, if possible try and ensure you don't apply for too many forms of credit (credit cards, insurance, mortgage, personal loan etc.) in a short space of time - spread them out throughout the year.
And you can find more tips in this article to help improve that credit rating.
Check your credit record for free with a trial from Experian
More: The secrets of your credit rating |The secret ways banks are damaging your credit rating