Checking your eligibility when applying for credit
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
23rd November 2020
5 minute read
When applying for a financial product such as a credit card, personal loan or mortgage, it can be difficult to predict whether you will be accepted or not. However, there are a few things you can do before you apply, such as using an eligibility checker.
The whole purpose of an eligibility checker is to predict the outcome of an application, without being penalised by a rejection. This pre-application guessing game can be a bit of a minefield as you try to predict if your credit score is good enough for a certain deal.
So rather than rushing in, applying and potentially getting rejected (which damages your credit score), try taking your time and finding the perfect match for you. Thankfully you don’t need a crystal ball, just a credit card eligibility checker or loan eligibility checker and a few handy hints from a certain purple-robed Guru with a fondness for financial enlightenment.
How do I know if I’ll be accepted for a credit card, loan or mortgage?
The answer is: you don’t.
But that doesn’t mean you can’t take steps to improve your chances of being accepted.
Credit card providers, along with personal loan and mortgage lenders, all have their own criteria for who should be accepted, with some being more stringent than others.
In general, they are looking for a trustworthy candidate who has a history of making repayments on time and effectively managing their finances without any problems. This means that if you have a high credit score and a clean financial history, this puts you in a good position already. However, if you’re planning to apply for a financial product that needs an excellent credit rating, such as a low rate credit card, it still might be difficult to predict.
The problem with prediction
Unfortunately, this puts you in a difficult position. Since you will only truly know if you will be accepted by applying, you also leave yourself open to a rejection. This wouldn’t normally be a problem, but a rejection does leave a mark on your credit file, meaning that a follow-up application will also take that rejection into account too. Multiple rejections in a short space of time will make it look like you’re desperately trying to apply for credit, making you seem untrustworthy to major lenders.
The best advice we can draw from this is that never rush in and apply without doing some more research first about whether you’re eligible or not.
Finding out your eligibility – asking the right questions
Before you apply for anything, it’s worth having a look around and taking your time discovering how eligible you are for certain financial products. Doing so will allow you to safely apply without facing a rejection.
The following questions will help make your eligibility search a bit clearer:
- Will using an eligibility checker affect my credit score? – No. Using an eligibility checker involves a ‘soft search’ of your credit file rather than a hard search. By taking a few personal details it can point you in the right direction of choosing the most suited credit card, loan or mortgage, without leaving so much as a scratch on your credit report
- What is a soft search? – this is a simple background check that takes into account basic personal details. Whilst it uses some of your information to reach an eligibility result, it won’t affect your credit score
- What is a hard search? – this will occur as part of a credit check when you apply to borrow money, checking that you are a suitable candidate for making repayments on a credit card, loan, mortgage or other finance deal. This will affect your credit score depending on the outcome
- What does it mean if I’ve been pre-approved? – this means that the information you have supplied so far entitles you to a certain deal. However, the deal will be subject to final checks so could change, or you could be offered the same card but with a higher interest rate.
A word to the wise – your interest rates may differ
Have you ever seen the phrase ‘representative APR’ included along with any financial product? The reason this is listed is to indicate the interest rate that 51% of applicants will receive.
However, if you’re judged by the provider or lender to be a part of the lower 49%, you will receive a higher rate of interest. This is to reflect that you have still been accepted by the provider or lender, but certain factors have deemed that you will not receive the advertised rate. This could be due to your credit score, your financial history or another detail that puts you out of the top 51%.
At the end of the day it’s the lender’s decision and an acceptance won’t harm your credit score. If it happens to be a higher interest rate that you aren’t happy with, then simply refuse the finance.
Read more about repricing and interest rates here.
Steps to take before applying for credit
With this in mind, it’s important to take your time when applying for any financial product, making sure you understand everything that you are committing to when taking on a credit card, personal loan or mortgage.
Having a full understanding of how to safely check your eligibility, will allow you to choose the most suited deal for your circumstances and avoid multiple rejections that will ultimately harm your chances of applying for any other financial products in the future.
The following steps should be followed before applying for a new financial product:
- Find out your credit score – if you haven’t checked your credit score recently (or ever), it’s important that you do so before even thinking about finance. This will give you the clearest indication if you can expect to be accepted for credit through a credit score
- Decide on the purpose of the credit – before even thinking about applying, you should be clear on exactly what the purpose is of getting finance is. While a mortgage has a clear purpose, you can get several types of credit card and loan so it’s worth understanding the benefits of each one
- Browse deals without applying – once you have decided on the reason for credit, you can make a preliminary search for deals that might suit you. The important part is not applying just yet, just get a flavour of the types of deals available and how each one works
- Check the summary box – each credit card or loan will come complete with a summary box document, indicating the various terms that come with taking on that particular finance deal. This will give you the clearest understanding of the stipulations of your credit agreement and if this fits in with what you can afford on a monthly basis
- Use an eligibility checker – once you understand the types of deals that are available, you can narrow down your search without risking your credit score. Simply input a few personal details in moneymatcher and wait for the results to roll in
- Choose the right deal for you – all that information sunk in yet? Once you are completely sure that the financial product is right for you, go ahead and apply.
Are you ready to get started? Follow the steps above and start narrowing down your search for the perfect credit card, loan or mortgage. Remember to try out our moneymatcher for credit cards and moneymatcher for loans to deliver tailored deals without affecting your credit score.
If you need any more advice before you get started, have a browse through our product guides to find out more about which one is the right one for you.