Frequently Asked Questions

Credit card limits and rewards

How do I get a low APR credit card?

To get a low APR credit card you should:
1. improve your credit score. The lowest APR rates are usually reserved for those with the best credit scores, therefore to get lower APR rates you should first work on improving your credit score.
2. Get a card with an interest free or low APR introductory offer and see if they are willing to negotiate to extend the offer time.
3. Shop around! Compare credit card offers and ask issuers what they are willing to offer.

What is a good APR rate for a credit card?

A good APR rate for a credit card ranges from 17-24% depending on the type of card and your credit score. A secured credit card will have a lower interest rate at around 17% on average whereas credit cards for people with a fair credit score have an average of around 23.5%. To get a good APR rate you should look at improving your credit score.

What credit score do I need for low APR?

For a low APR credit card you'll usually need a good or excellent credit rating.
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This means an:
- Experian score between 881 and 999
- Equifax score between 420-470
- TransUnion score between 604-710

Will my credit score affect my APR?

Yes. Your credit score will affect the APR rates you're offered in most instances. A higher credit score means you're more likely to pay lenders back, the more likely you are to pay back the better offers you will get. Your credit card issuer can change your APR rates but must notify you of any changes.

Does a high credit limit affect your credit score?

A high credit limit can improve your credit score over time. Applying for, or increasing your current credit limit may cause an initial dip in your credit score but in the long run it will improve your credit utilisation which makes up 30% of your credit score. A higher limit means a lower credit utilisation rate and that helps your credit score increase.

Why do credit cards give cashback?

Credit cards give cashback to convince customers to choose their credit card. The more customers a credit card company has, the more money it can make. This is why credit cards give rewards such as cashback, to entice borrowers to choose their credit card instead of a different card.

How do cashback credit cards work?

Cashback credit cards work by paying you a percentage of every purchase you make on that card. This can be redeemed as either cash or other rewards. You will usually need an excellent credit score to get a good rewards card. Remember when choosing a rewards card to choose one that will give you the most rewards where you usually shop.

How to calculate cash back on credit cards?

A cashback credit card will give you a certain percentage of what you buy back. Typically, this is between 1 and 2% but can go up to 3 or 5% depending on your card and the type of purchase you are making. To calculate how much cashback you will get, look up the price of items and see what percentage you will get back for making the purchase with your card.

Credit scores

Why does a credit score matter?

A credit score matters because it’s one of the main indicators lenders look at when they’re deciding whether to lend to you or not. Essentially, a credit score matters because it will decide if you get access to credit, and the cost of that credit.

A good way of thinking about credit scores is that they are a number that shows how credit worthy you are. The more credit worthy you are, the more likely you are to be approved for credit. A good credit score also means you’re more likely to get better interest rates and offers on credit cards and other forms of finance.

How do I improve my credit score?

Here are ten ways you can improve your credit score:
- Check and correct any errors on your credit report
- Lower your credit utilisation rate
- Always pay your bills on time or at least make the minimum payment
- Use a credit builder card
- Use a credit builder app to improve your credit score without going into debt
- Use a credit builder loan
- Improve your credit score using a store card
- Get on the electoral roll. Being on the electoral roll could improve your credit score by 50 points

Who decides my credit score?

Your credit score is decided by Credit Rating Agencies (CRA’s), also known as Credit Reference Agencies or Credit Bureaus. In the UK there are three main agencies that decide your credit score: Experian, Equifax and TransUnion.

Your credit score will differ depending on which CRA you get it from. Experian gives you a credit score between 0-999, Equifax 0-700 and TransUnion 0-710. Your credit score is decided by the CRAs based on how you’ve managed money in the past. Different lenders will report to and get reports from different agencies.

Will applying for credit hurt my credit score?

Applying for lines of credit usually causes an initial dip in your credit score. This is because lenders perform what is called a ‘hard credit check’ or ‘hard search’ to show you have applied and been approved for a line of credit. When lenders perform a hard credit check this is recorded on your credit file so other lenders can see you have applied for credit.

If you make multiple credit applications in a short space of time this will most likely cause your credit score to drop. Applying for a lot of credit lines signals to lenders that you are either in financial difficulty or you are desperate for more credit. Either of these would lower your creditworthiness and therefore your credit score.

What makes up a credit score?

A credit score is made up of five factors according to Experian: payment history, credit utilisation, credit history length, credit mix and how new your credit is. Each factor has a different weight in deciding your credit score.
Below you will see a list of factors and their weighting.
- Payment history = 35%
- Credit utilisation = 30%
- Credit history length = 15%
- Credit mix = 10%
- How new your credit is = 10%

What’s the fastest way to build my credit score?

The two fastest ways to improve a credit score are:
- Register to vote
- Lower your credit utilisation
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Registering to vote can improve your Experian credit score by up to 50 points. Keeping your credit utilisation below 25% can improve your score by up to 90 points.

Your credit score is made up of five different factors. To build your score fast, you first need to know which factor you need to improve most, and work on that first.

How long does it take to build credit?

Building credit is a process that can take 6-12 months if you are building a credit score from scratch.

Five factors build up your credit score. The first step in building a credit score is understanding which factors to work on most. If you have a thin credit file, it will take around 3-6 months for your credit score to improve.

If you have a CCJ or insolvency, it can take much longer to build your score. CCJs can impact your Experian score by -250 points.

How much will being on the electoral roll improve my credit score?

Being on the electoral roll can improve your credit score by up to 50 points. This is for Experian credit scores.

Being on the electoral roll improves your credit score because lenders can use it easily prove your identity which makes you less risky to lend to.

The electoral roll is a list of the names and addresses of everyone who's registered to vote. If you're 16 or older, UK law requires you to be on the electoral roll.

How long does it take to fix my credit score?

A credit score can take around 6-12 months to fix but may take longer depending on your circumstances.

A CCJ will reduce your Experian score by -250 points. A defaulted account will reduce your Experian score by -350 points. Both of these stay on your credit file for six years. Some lenders won't mind you having CCJs or defaults on your file after several years, but your credit score will still be low.

Being late on a credit card payment, having multiple hard credit checks in a short span of time, or having credit that is less than six months old can also reduce your score by up to 50 points. However, if you keep up on payments your score should recover after six months or so.

How much can my credit score change based on my credit utilisation?

Credit utilisation makes up 30% of your credit score. As credit utilisation is so important in deciding your overall credit score, any change in the utilisation will have a significant impact on your score.

If you have a credit card that is more than 90% utilised, your Experian credit score could go down by 50 points. If you lower your credit utilisation to less than 25% on a credit card, your Experian credit score could improve by up to 90 points.

Your credit utilisation is the % of available credit you have that you are using. For example, if you have a credit card with a £500 limit, and you've used £250 of it, your credit utilisation is 50%.

How do I check if I am on the electoral roll?

There are two ways to check if you are on the electoral roll: by checking your credit report, and by contacting your local registration office.
You can download your credit report for free with Experian, TransUnion, or Equifax. This won't impact your credit score.

If you prefer to check if you are on the electoral roll offline, you can contact your local Electoral Registration Office if you live in England, Scotland or Wales. If you live in Northern Ireland, contact the Electoral Office for Northern Ireland.

What is Experian/Equifax/TransUnion?

These are the three main Credit Reference Agencies (CRAs) in the UK - in simple terms if a consumer or business uses credit then the lender will report the activity on that credit account to one, some or all of these CRAs.

What is a CRA?

CRA stands for 'Credit Reference Agency' - these agencies collect and store information on consumers that use credit. Both consumers and lenders have access to this information.

For consumers it helps them understand their position in the credit market such as changes of getting accepted for a line of credit.

For lenders it helps them make informed lending decisions by seeing if they are about to lend to a responsible borrower.

There are three main CRAs in the UK - Experian, Equifax and Transunion - they all collect, store and analyse information on consumers that use credit and present that information as a score that represents an individuals credit worthiness.

Why are my credit scores different?

There are three main reasons why your score may differ between the 3 major Credit Reference Agency's (CRAs) in the UK.
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The first reason is that not every lender/creditor reports to every CRA. Some may report your payment behaviour to all three, while others may report to one or two. This means that not every CRA will have a complete record of your credit account and payment history, and some may hold more information about you than others. If you want to know who a lenders/creditor is reporting your payments to you can always ask them, that way you you will know which score(s) you should be monitoring more closely.
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The second reason is because each Credit Reference Agencies has their own set of maximum credit scores and bands. For example, Experian's maximum score is 999, TransUnion's is 710, and Equifax's is 700.
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Finally, the three CRAs use their own score card which might have different criteria.

What score does ClearScore show?

ClearScore shows your Equifax credit score and allows you to access your score and credit report with Equifax for free. Once you sign up for ClearScore, they will show you personalised advertisements for financial products. They receive a commission when you buy these products, which lets them give you access to your Equifax score and credit file for free.

Does withdrawing cash from credit card affect credit score?

Withdrawing cash from a credit card will not impact your credit score directly but it will be visible on your credit report. If you withdraw large sums of cash with your credit card it could affect your credit utilisation rate. A high credit utilisation rate can negatively impact your credit score.

Definitions

What does in credit mean?

In credit' means that you have money in your account. It is the opposite of in debit which means you owe money.

If you are ‘in credit’ it means that you are owed money by a particular organisation. You may have made an overpayment on a bill, or your bill may have been miscalculated and you actually owed less than you paid. When this happens you are actually in credit and owed money. This is more common on utilities than credit cards.

What does in debit mean?

It means that you owe a certain amount of money to a particular organisation. 'In debit' is the opposite of 'in credit'.

This happens when you:
- Have taken out credit or a loan
- Have not made a payment on a bill
- Have used a service that you have not yet paid for
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When you are in debit the organisation you owe will tell you how much you owe and when you need to pay the debt off by.

What is APR?

APR is the interest rate on your loan for the whole year. APR stands for the Annual Percentage Rate. APR is applied to most financial products that extend you credit such as a mortgage, loan, credit card, car finance and more. APR can be charged in addition to monthly fees or rates.

Your APR is calculated by dividing the fees and interest paid over the loan term divided by the loan amount. This is then divided by the number of days in the loan term. This is then multiplied by 365 and then multiplied by 100.

What is AER?

AER is the Annual Equivalent Rate. AER is also called an effective interest rate, Effective Annual Rate (EAR) or Annual Percentage Yield (APY). AER is primarily used to compare savings accounts but can also be used to calculate interest on loan and credit products. AER is used because it takes compound interest into account. Compound interest is just interest on interest you’ve earned in a previous period.

For example, if you have an overdraft of £1,000 and the EAR is 1%, your £1,000 will grow to £1,010 at the end of the year. The next year, you will pay interest at an EAR rate of 1% on £1,010. This goes on until the entire amount is paid in full.

To calculate EAR and see how much a loan would cost you use an EAR calculator. There is an EAR calculator available here.

What is Credit Card utilisation?

Credit Card utilisation is the amount of your available credit you are currently using. Shown as a percentage, your credit card utilisation is an indication of how well you can manage money and debt. The lower the credit card utilisation the better. In fact, your credit card utilisation is very important in deciding your credit score therefore experts recommend you should try to keep your credit card utilisation below 30%.

To calculate your credit card utilisation simply add up all the money you have borrowed, and the amount of money you could borrow if you used all of your credit limit. Then simply divide the amount of credit you are using by the amount of credit you could be using at multiply that by 100.

What is a CCJ?

A CCJ is short for County Court Judgment. It happens when lenders register a court order against you after you fail to repay them any money that you owe.

Before you receive a CCJ, a lender must send you a warning letter or default notice. If you receive one of these, get free debt advice straight away to try and avoid having one on your credit file.
Having a CCJ can reduce your Experian credit score by 250 points for six years. Typically lenders will register a default on your account together with a CCJ, which can lower your score by another 350 points, so it's important to take immediate action.

What is an IVA?

An IVA is short for an Individual Voluntary Agreement. It's a legal obligation between you and your lenders to pay back any debt you owe over a certain amount of time.

You can enter an IVA if lenders holding 75% or more of your debt agree to it. An IVA has to be set up by a qualified individual, called an insolvency practitioner, who deals with lenders on your behalf.

An IVA can offer you more flexibility to pay off your debt. If you enter into an IVA, it also stops you getting any new CCJs from lenders who are part of the IVA. However, insolvency practitioners can charge fees, which may be expensive.

Credit card management

Why is my available balance less than my balance?

Your available balance may be different to your current balance as some transactions are pending which means they haven't been processed yet.

Your available balance is what is what you can access, but your balance will include amounts pending to come out of your account. Once a payment is pending you can't access the money. This is why you should always keep an eye on both balances and report any suspicious activity to your bank immediately.

How many credit cards can I have?

Technically there is no limit to the number of credit cards you can have. If you have a few credit cards and use them responsibly it can improve your credit score. The more credit cards you have, the higher your credit card limit will be. This will mean that you can use credit and still have a low credit utilisation rate overall. Maintaining a low credit utilisation rate across all credit cards will help your credit score.

How many credit cards is too many?

There is no number of cards that's 'too many', you should have at least one credit card but having multiple can be hard to manage. As long as you stay on top of all your bills, you can have as many credit cards as you want. However, applying for multiple credit cards in a short space of time can hurt your credit score so if you do want credit cards take them out over a longer period of time.

Does Aldi take credit cards?

Aldi does accept credit card payments. In store Aldi accepts:
- Visa
- Mastercard
- Maestro
- Delta Electron
- American Express
Aldi also accepts the following contactless mobile payments in store:
- Apple pay
- Android pay.
Online Aldi accepts:
- Visa
- Mastercard
- American Express

Should I get a credit card in the UK?

You should have at least one credit card in the UK if you are looking to build a credit score in the UK. If you have recently moved to the UK or plan to spend lots of time in the UK it is wise to build your credit score using a credit card or credit builder alternative to make sure you can access different forms of credit if you need them.

What is my credit score if I never had a credit card?

Your credit score is not going to be low just because you haven't got a credit card. Your credit score is based on your financial history, this is every type of finance from a car loan, student loans, an overdraft, some utility bills and more. You will have a credit score even if you have never used a credit card before.

Debt management

How long does an IVA stay on my credit report?

An IVA will stay on your record for six years.

If you get an IVA, this will be recorded in two separate places.

The first is on your credit file with credit bureaus like Experian, Equifax and TransUnion. Once you have an IVA, it will stay on your credit file for six years from the day it starts.

An IVA is also recorded on the Individual Insolvency Register. Details of your IVA will be removed from the register three months after your IVA has ended.

Is an IVA better than a CCJ?

This depends on your individual circumstances.

While it can cost money to set up an IVA, it may offer a more flexible way to repay your debt. IVAs also stop you getting any new CCJs from lenders who are part of the IVA.

IVAs also absorb any CCJs you have. This means you won't need to make payments on the CCJs, and you only repay the IVA.

There are certain restrictions that come with IVAs. For example, you must get permission from your insolvency practitioner to take out more than £500 of debt, and also keep a budget.

I can't pay my credit cards what will happen?

If you can't pay your credit cards this is what could happen:
- you could be charged late fees
- your account could be cancelled
- your credit score could decrease
- your debt may be sold on to debt collectors
- you may receive a CCJ or IVA
The action that's taken will depend on the size of the debt you owe on your credit card and how late you are in repaying. Credit card firms would rather have some form of repayment so if you can't pay your credit cards it's important you contact your credit card issuer immediately.

Building credit

What is a ‘thin’ credit file?

A ‘thin’ credit file is a credit file without much information on it. It means that lenders and Credit Reference Agencies don't have enough information on your finances and financial history. A thin credit file is also called being ‘credit invisible’.

A thin credit file is a problem. If you have a thin credit file, this may prevent you from accessing products like car financing, phone contracts or mortgages.

But not to worry, there are many things you can do to build your financial history like using credit builder apps, registering to vote, or taking out small amounts of credit. Building credit can take several months, and you will need to be patient.

How does information show on my credit report?

Your credit report is an overview of how you manage your credit accounts. The types of information shown on your credit report includes:

- Identifying information, such as full legal name, current address and address history, date of birth and National Insurance number. This ensures that creditors and lenders are reporting credit activity against the correct person.
- Credit account information including the type of credit (credit card, vehicle loan, mortgage etc), the date the accounts were opened, credit limits, loan balances and payment history.
- Inquiry information, better known as 'soft' or 'hard' inquiries or checks. A soft inquiry gets recorded on your credit report, but only you can see it, and it won't affect your credit score. A hard inquiry is visible to lenders, and can result in a dip in your credit score as it demonstrates you have applied for a new line of credit. Too many hard checks can indicate to lenders that you are in financial difficulty.

Your credit report will also show if you have declared yourself bankrupt at any point, and if any money that you have owed has been handed over to a debt collection agency.

How can I build credit with no credit history?

To build credit if you've got no credit history you can:
1. Apply for a credit card
2. Make sure you're paying all your bills on time, especially your phone and utility bills as these can be reported to credit reference agencies
3. Use credit building apps to build credit without going into debt
4. Get on the electoral roll - it can increase your credit score by up to 50 points
5. get a credit builder card
6. get a credit builder loan

Do I need a credit card to build credit?

No. You do not need a credit card to build credit. Here are alternative ways to build credit:
2. Make sure you're paying all your bills on time, especially your phone and utility bills as these can be reported to credit reference agencies
3. Use credit building apps to build credit without going into debt
4. Get on the electoral roll - it can increase your credit score by up to 50 points
5. get a credit builder card
6. get a credit builder loan
7. report your rental payments to credit rating agencies

How can I build my credit score when I have a CCJ?

A CCJ can lower your Experian credit score by 250 points, and stays on your credit file for six years.

If you manage your other credit agreements responsibly, your credit score should improve as your CCJ ages.

There are certain actions you can take to try to improve your score in the meantime. For starters, keep on top of any repayments for your CCJ, and any other credit that you have. Try not to take out any new forms of credit either.

There are some other ideas to quickly improve your credit score on the credit score section of these FAQs.

High limit credit cards

How can I get a credit card with a high limit?

Credit cards with the highest limits are usually only given to people with good or excellent credit scores. This means an:
- Experian score between 881 and 999
- Equifax score between 420-470
- TransUnion score between 604-710

How to get a higher credit limit?

Credit cards with high limits are usually only given to people who have a history of managing credit well and a good or excellent credit score. To get a higher limit offered on a credit card you should:
1. manage your current credit lines well
2. always pay your bills on time and in full
3. improve your credit score
4. keep your credit utilisation low

Credit Library

An 'Excellent' credit score could save you could save you tens of thousands £s over a lifetime.