Build an impressive credit score with Lloyds new credit card.
Lloyds Bank has launched a new credit card aimed at people who want to boost their credit rating. The Classic card also offers six months interest-free on balance transfers, for a 3% fee, along with 0% on purchases for three months.
There's no annual fee on the Classic card.
If you’re accepted, you’ll get a credit limit of at least £500. The card's representative APR, the annual combination of interest and fees you're charged if you don't pay off your balnce in full each month, starts at 25.9%.
How a credit builder card works
The whole idea of this type of card is to help build your credit score, so it’s perfect if you don’t have much of a credit history.
Spend a little bit on it every month, then make sure you make repayments in full.
Even doing this over only 12 months can really help boost your rating and put you in good stead, even if you’ve defaulted on a payment in the past. But be aware that you won't be able to apply for this card if you have recent defaults or CCJs.
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Comparing the market
There are a few other cards out there that offer 0% periods for people with limited credit histories.
The pick of the bunch is the Barclaycard Platinum 18-month card, which offers 18 months interest free on balance transfers for people who don't have a long credit history and don't have more than two other credit commitments such as a loan, other credit card or mortgage. It also offers a three-month 0% period on purchases.
The balance transfer fee on this card is 2.9% and the representative APR is 24.9%.
Be wary of 0% periods
If you don't have a lengthy credit history then you won't qualify for the top credit cards which offer long 0% periods. But before you use the 0% periods on a credit builder credit card, you must make sure you can afford to repay your debt before the 0% period ends.
[SPOTLIGHT]This is particularly the case with the 0% purchase periods on the cards we've mentioned in this article as they are very short. Not paying off your debt will cost you in interest payments.
You must, at the very least, make the minimum repayment each month, otherwise you'll damage your credit rating and set yourself back.
Other ways to improve your credit score
Make sure you’re on the electoral roll
Being on the electoral roll, or register, is the easiest way for a lender to prove you are who you say you are. If you’re not sure whether or not you’re on the electoral roll, ring your local council and they can check for you.
Keep up with your repayments
Missing or making late payments will stay on your file for six years. If you pay on time and in full when payments are due it shows lenders that you are sensible with your finances.
If you’re struggling to keep up, contact your lender. A payment plan is better than defaulting, which brings us to our next tip.
Deal with previous defaults
Defaulting can seriously limit your ability to borrow.
If you feel that a previous default was unfair, you can complain to the Financial Ombudsman. Someone will be assigned to you and will examine your case from both sides and make a judgement. This can include a judgement where the default is wiped from your credit file.
Even being financially linked (through a current account, for example) with someone who has a dodgy credit history can affect yours too. Not always fair, but understandable.
If something they have done has affected you and you’re no longer financially linked to them, ask for a notice of correction to be added to your account. For example, your ex-partner ran up credit card debt after you no longer had access to the account. And remember to fill out a disassociation form which will stop their credit history affecting yours.
Cancel unused credit cards
Havig too many cards can be problematic as in lender's eyes you may actually have access to too much credit. If you have a number of unused credit cards, cancel most of them.
On the other hand, bank accounts you've managed well can enhance your credit score, so keep them open.
In the meantime, it’s best to check your credit report to weed out any errors.
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