Are you a rate tart?

27th April 2007 at 01:00
Do you juggle credit cards to maintain a 0 per cent balance transfer? If so, you could be facing a sticky end, warns Alison Brace.

If you happen to be one of those people who, over the years, has happily flashed their plastic and boasted about 0 per cent balance transfer deals, you know who you are and what you are. You may be an upstanding member of the community by day but away from the classroom, you are - in common financial parlance - a rate tart.

Credit card companies have fallen over themselves to meet your simpering advances, you've switched thousands of pounds from card to card, chipping away at bits of debt here and there.

And then one day, unexpectedly, you find your advances have been rebuffed.

Your spending power's no longer attractive and your applications for shiny new cards are turned down.

So why does this happen?

"If you rate tart - and, quite frankly, we all do it - then it might be the case that you have built up a number of opened cards," says Neil Munroe of Equifax, the credit reference agency.

You might not be using the cards because their 0 per cent period is over, but you haven't actively closed them down. On your credit file, your potential for spending is huge.

"If you have six cards, each with pound;10,000 limits, and you wanted to go silly, you could burn pound;60,000 at once," says Neil. So make sure you close those cards.

Lenders are increasingly looking at their own profitability as well as the credit worthiness of a customer. So you might be turned down because you have a history of moving your money around but not spending anything on the card.

And don't forget that everything feeds in to your credit rating. Have you bought a car using forecourt finance or a sofa on hire purchase?

"It might seem bizarre, but even non-payment of a mobile phone bill can stop some people getting a mortgage," says Neil. "Nowadays, early stress signs such as non-payment of a bill can be indicative of someone who is on a slippery trail."

That's why it is worth checking your credit rating - particularly if you are considering a major purchase. You can do it for free with or from for as little as pound;2.

But the glory days for the rate tart are over. You can still pick up 0 per cent deals, but now cards charge a handling fee that can be as high as 3 per cent of the amount you want to transfer.

Barclaycard, which has 9.8 million customers nationwide, now turns down half of all applicants.

It looks at how you use your credit and not just how much you have. "If you are taking a lot of cash out on credit cards, this is indicative of financial stress," said a spokesman for the bank.

Making a financial plan and clearing credit card debt swiftly is the best way to ensure you have a good credit rating.

But if you must be a rate tart and credit is refused, make sure you get a copy of your credit rating before applying elsewhere. Remember: each search by a lender leaves a further "footprint" on your credit file

Take the credit score test

Answer yes or no

1 Are you registered to vote at your present address? Y-10 N-0

2 Do you have at least two active credit accounts, such as a credit card, store card or loan? Y-10 N-0

3 Are all your credit account payments up to date? Y-15 N-0

4 Have you missed payments on your credit accounts in the past two years? Y-0 N-10

5 Do you have any county court judgments or have been declared bankrupt? Y-0 N-25

6 Have you ever defaulted on a credit agreement? Y-0 N-25

7 Have you applied for more than two items of credit in the past six months? Y-0 N-5

Scorecard 90-100 Excellent. You a strong candidate for credit.

70-89 Good. You have a good chance of being granted credit.

50-69 Fair. You may have some problems obtaining credit.

0-49 Poor. You may have considerable difficulties obtaining credit.

Source: Equifax

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