How do I figure out which Credit Card is best for me?

The current economic climate probably has many people noticing that the Bank of England rate has dropped to 0%, but the rate for many credit cards is constantly increasing. Thankfully this is not the case across the board, for example the Bank of Scotland All in One Credit Card offers a very reasonable 15.9% p.a. after giving you 0% for 9 months on balance transfers and purchases.

So, how to proceed? First have a look around credit card comparison sites, like this one and see which one best suits for needs, if you’ve got bad credit then you’re options in terms of cards are going to be less than if you have excellent credit.

You’re more likely to have a good credit rating if you’ve managed to avoid County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs), Bankruptcy and you make your bill and credit card payments on time.

Before you apply for a credit card, you should try to get your credit rating in the best possible shape. Here are some tips and tricks to help you improve your credit rating:

1. Pay off more than your minimum balance – the insight is that Credit Card Companies believe that people who only make their minimum payment are more likely to be financially at risk, therefore are more likely to default on their payments
2. Review your monthly debt to income ratio You can calculate this ratio by dividing the total amount of money you pay to debtors (credit cards, loans, mortgages etc) and then divide it by your total income. If this ratio is more than 35% of your total monthly income, then financial companies consider you a risk. If this is the case, it’s probably a pretty good indicator that you’re living beyond your means, you should cut back your expenditure and get your debts down to a much more manageable proportion (at least below 20%). Once you’ve sorted this out, you’ll be in a much better situation financially and have more credit card options available to you.
3. Make sure that you make all your payments on time This applies primarily to outstanding debt payments, but being late for bills can also have an adverse effect on your credit rating. If you don’t have a good record, it will take at least 12 months of making all your payments on time to get your credit rating back up to scratch. An easy way to make sure all of your payments are made on time is to set up a direct debit scheme. If you can arrange it so the bills all come out the day you get paid, then there shouldn’t be any issues with overspending.
4. Check you don’t have too much credit When people check your credit report, it will not only show how much you owe, but also how much you can potentially owe. This is to show to potential loaners how much debt you can currently access, which in turn affects your risk level. Trim this down to the minimum you will need, this makes you more appealing to lenders and it also reduces the risk of getting into unmanageable levels of debt.
5. Don’t make multiple credit card applications If you are making multiple credit card applications, lenders will think that you’re in desperate need of money, and think that you’re a risk

A good rule of thumb is to think that if your behaviour is reflective of someone who is in need of money urgently, then you probably seem like a risk to a credit card company. If this is the case you’re less likely to be able to secure the funds you need.

Once you’ve managed to look after your credit rating for a year by following the previous tips then you’ll be in a strong position to get the a good credit rating. Then work out which one suits your needs best and apply.

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