December 6, 2010
There is a universal myth that your credit history affects whether a financial institution approves your credit card application or not. Is this true and if so what do you need to know?
When applying for credit cards most financial institutions approve or decline your application based on your individual financial information including your credit history, income, and employment status.
However, depending on your situation you may still be able to get a credit card so don’t be too concerned if you need to change your credit cards.
No credit history?
Credit history is a report which shows your financial history including your current financial situation and ability to repay debts such as credit cards and bills.
If you don’t have a credit history – which means you have no records of debt or bills against your name – and want a credit card, you may also still be able to apply if you have a regular income and prove that you can meet the repayments.
If you are approved, chances are you will receive a standard card as opposed to a platinum card and your credit limit may be low or set at a minimum amount. Be aware that the interest rate could be higher as you are considered more of a risk than someone with a good credit history.
But you can build up your credit history by meeting all of your repayments and paying your bills on time. When it comes to applying for a loan or increasing your credit limit lenders will use this for your credit check.
Bad credit history?
If you have missed paying a bill or a fine on time, chances are you could have a mark on your credit file. Unfortunately if you are in this situation it could impact your chances of getting a credit card.
"A bad credit history can undoubtedly affect your chances of getting a credit card," says Virgin Money spokesman Nick Larkworthy. "Your credit history is what card issuers go by to assess the risk you pose for not paying your bills. At the end of the day, credit card providers must be responsible lenders."
Maintain your credit history
Regardless of whether you have a good, bad or no credit history, it is important to maintain it.
According to a spokesperson for Westpac, "It is best to ensure your credit history is as clean as possible and, to do this, you should ensure that you pay all outstanding bills, from mortgage and credit card payments to white goods leasing and video shop rentals."
To find a card that suits your circumstances and budget compare credit cards online, or to check the status of your credit file, there are a number of websites such as Veda Advantage offering this service.