Credit Cards and Credit Rating

There has been a long debate regarding the pros and cons of Secured and Unsecured Credit Cards, more likely relating to interest rates, rather than analysing the advantages of a credit card toward fixing bad credit or improving your credit rating.

Depending on whatever behaviour your actual credit history exhibits, taking one or another is up to you. Whilst it is easier to get approved for Secured Credit cards, the drawback are the higher interest’s rates generated by this financial instrument.

Either way credit card issuers usually request on the cardholder a minimum amount to be paid each month, which is subject to penalties for late or returned payments if the borrower exceeds the credit limit.

Otherwise, the cardholder is asked to pay a monthly percentage on any outstanding balance. Of course, all these movements are reflected on the credit rating of the borrower.

Applying for an Unsecured Credit Card is advisable if you are wanting to improve your credit rating, because Secured Credit Cards help you to repair a damaged credit history, but may ruin your credit rating if you fail to pay off any monthly statement.

In the United Kingdom, lenders will check your credit rating though the three major credit reference agencies: Callcredit, Experian, or Equifax. Information gathered by those agencies is useful to assess the risk involved in lending you money.

Typical credit rating information also includes public records with your electoral register, county court judgements, repossessions, bankruptcy orders, and many other details including all of your past and present credit applications.

Getting a copy of your credit record is useful before applying for a credit card, because you can always have incorrect information removed by contacting the credit reference agencies listed above.