Consumer champion Martin Lewis has a warning for people who are planning to apply for a credit card.
Martin is urging borrowers to use a free soft check eligibility calculator before getting a card. Eligibility checkers show how likely you are to be accepted for a deal before you apply.
Credit reports list how many times you've applied for cards and loans, and too many applications close together could make you look like a risky borrower. This is because you could be seen to be struggling financially.
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To avoid having to make too many applications, eligibility calculators are advised, according to The Mirror. “Almost every credit application goes on your credit file,” Martin 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.” MoneySavingExpert listed several free eligibility calculators in its latest email.
Martin went on to explain that having a low eligibility score doesn’t necessarily mean you won’t go on to 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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