How to borrow without leaving a trace

Neil Faulkner,  27 Jul, 2011

Applying for a loan or credit card can harm your credit profile. Here’s how to seek a top deal without leaving a trace.

The credit card industry received a shake-up in July when Barclaycard announced its market-leading 24-month balance transfer card.

We gave a lot of attention to this new two-year, interest-free deal from Barclaycard with its 3 per cent fee to move debts from existing cards.

The card has since been withdrawn but there are plenty more interest-free, balance transfer credit cards including Halifax, MBNA and Virgin offering similarly good deals. But these cards come with a warning for borrowers: you must have an excellent credit record.

Why is good credit so important?

These cards are aimed at so-called prime customers and so only accept people with a good credit profile. Apply for one of these cards when you're not registered to vote, have missed some debt repayments, or have borrowed too much for example, and there’s a fair chance you’ll be rejected.

To make matters worse, if you have borrowed too little you could be rejected as well, as lenders want to see that you can reliably repay debt.

As a result, Confused.com estimates just half of applications for the Barclaycard would have been successful.

Rejection can lead to credit problems

Being rejected isn't just a disappointment, it can have knock-on effects when you apply elsewhere.

When you apply for a loan or credit card, lenders will look at your credit report, as provided by one of the UK's three credit-reference agencies.

These reports show how many times in the recent past you have applied for credit. If lenders see you have made several applications it can increase your chances of being rejected again.

Apply tactically for a credit card

If you are looking for a credit card and don't think Barclaycard or similar lenders will accept you, or you would rather have a different type of card, Confused.com offers a Card Matcher service that can help you to judge whether your application for a card will be successful.

This service is risk-free and leaves no mark on your credit report, so effectively you can speculatively apply without leaving a trace.

Applying for cheapest cheap loan without marking your credit record

Nationwide claims to be the only lender that offers “soft quotes”. It will discreetly check your report and tell you what interest rate you can get, if any.

If you accept the quote, it will then mark your report, and you will have succeeded in getting the loan. But if you don't like the quote, you ignore it, and Nationwide leaves your credit report unmarked.

What makes this even better is that Nationwide's personal loan is currently the cheapest on the market. If you are eligible for its top interest rate, you will pay just 6.6 per cent a year. Nationwide Flex Account customers can save a fraction of a percentage point less, potentially getting a rate of 6.5 per cent.

Just slightly over half of successful applicants will be offered Nationwide's advertised rate. The rest will probably be offered a higher rate, but that’s normal with all lenders.

The advantage with Nationwide is you get to see the quote without it marking your record. In other words, if you need a loan, it won’t damage your credit profile to go for the cheapest loan on the market first, even if there’s a risk of being rejected. The offer is for loans between £7,500 and £14,999, but don't borrow more than you really need.

The loans market today

Just four lenders offer loans below 7 per cent at the moment, which puts Nationwide in very exclusive company with just Alliance & Leicester and M&S Money.

 

Topics: Smarter spending Tags: Debt, Loans, Credit cards Confused Topics Get motoring Property market Deal with debt Plan for the future Smarter spending Get wealthy Travel & holidays Shrink your bills Your consumer rights Neil Faulkner Neil Faulkner waded his way through a mountain of claims as a paralegal before moving on to be an insurance consultant and claims manager. He is a long-term investor, and one-time property owner and landlord. He writes about property, investing, insurance, consumer issues, and helping people get out of debt misery.

Latest articles from this author Top 10 credit card tricks to avoid Earn 13% interest on your cash How to future-proof your retirement income Plan ahead and cut the cost of Christmas with the right credit card Most popular articles Most comments Most views Most likes Follow us Twitter RSS Facebook About Us Contact Us FAQs Help Press Room Privacy Policy Providers Terms & Conditions Security

© Copyright 2008 - 2011 Confused.com. All rights reserved.

View the Original article