Martin Lewis has issued an urgent warning to anyone who is considering taking out a credit card.
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.
To avoid having to make too many applications, Martin has urged borrowers to use a free soft check eligibility calculator first.
Eligibility checkers show how likely you are to be accepted for a deal before you apply.
“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.”
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."
Cut your credit card debt
If you've taken out a credit card, chances are you're paying too much in interest each month - this means it'll take you longer to pay off what you owe.
The average purchase APR – annual percentage rate, which is the yearly rate of interest applied to credit cards – stood at 30.6% last month, according to Moneyfacts.
If you're paying interest each month, see if you can move your credit card balance over to a 0% balance transfer card.
This means you pause all interest payments while you’re paying the amount on the new card - so you become debt free quicker.
Before you go taking one of these cards out, you'll need to check for the best deals and see how long you reckon it will take you to clear your debt.
You need to make sure you can pay off the whole balance before your 0% interest period finishes or you’ll start paying the representative APR.
You also need to always make your minimum repayments, otherwise you risk losing the 0% interest perk, and check if there are any fees involved when transferring your debt.
Finally, you should avoid spending or withdrawing cash on these cards as you’ll often lose the 0% period - and the fees can be expensive.
The longest 0% balance transfer card available right now is from MBNA, where you could get up to 31 months interest-free.
This charges a fee of 3.49% fee to move your balance over, and after the 0% interest-free period is over you'll pay 22.9% representative APR.
There are shorter cards available offering zero fees, if you think you can clear your debt quicker.
For example, NatWest offers 19 months at 0% with no fee, and HSBC customers can get 16 months no-interest.
