Martin Lewis has issued an urgent warning for anyone considering taking out a credit card during the cost of living crisis.
When applying for a credit card, it's important to be aware that credit reports will likely list how many times you've applied for previous cards or loans. If you've made too many applications in a short amount of time, a bank may consider you a risky borrower who has financial problem.
In order to avoid this, the money-saving expert has urged borrowers to apply for a free soft check eligibility calculator first which show how likely you will be accepted for a deal before applying, the Mirror reports.
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“Almost every credit application goes on your credit file,” he said in the latest MoneySavingExpert email. “The system is effectively anti-shopping around, as get rejected or a worse rate than advertised, and you'll need to apply elsewhere, but too many applications, especially close together, is negative.”
He continued: “Eligibility [calculator] searches do go on your file, but only you can see them, lenders can't, so it doesn't impact your future creditworthiness.”
However, Martin highlighted that having a low eligibility score on a calculator doesn't necessarily mean you won't be accepted for credit. As an example, if it says you have a 20% of being accepted, this means two in 10 people. “You may be one of those,” said Martin.
The MoneySavingExpert founder shared an email from a reader called Martin who found himself in a similar situation when he used an eligibility calculator.
“I applied to the top eligibility checker result, which I'd only 20% chance, and guess what? I was accepted and offered a £3,500 limit at 0% for two years, " he said.
“This debt was 20% APR. I can now focus on other debts, potentially having an extra £1,328ish over the 0% period to reduce the amount owed."
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