Archive: MoneySavingExpert's Money Tips Email

Test your Credit Eligibility Rating!
5 steps for EVERYONE with credit card debt to slash costs. Including...
- New. 34mths' 0% debt shift
- New. 13mths' NO FEE 0% debt shift 
- Plus 0% poor-credit deals

There's a perverse reality that those most in need of cheap credit are the ones who find it hardest to get. Misinformation and misunderstandings exacerbate that, including the myth that you have a single credit rating - so if one lender rejects you, they all will - which still abounds.

Today, with a host of new, better deals launching (jump to top 0% balance transfers), including 0% poorer credit scorer deals, I want to take you through step-by-step how to check, protect, maximise and best utilise your credit ability to minimise current debt costs.

Step 1: Test your Credit Eligibility Rating (a more reliable indication than your credit score)

The days of a bank manager sitting across a desk to work out whether consumers were safe to lend to are now mostly consigned to history. Acceptance is now data driven. So, it's important to know where you sit in the credit get-ability league table, and how to climb it.

Yet while the data is the same, each lender credit-scores you differently based on its OWN wish-list of what makes a profitable customer (some even target those with worse histories). There's no universal rating, or a blacklist. It's lender-by-lender. 

MSE's Credit Eligibility Rating assesses your real credit get-ability

In the free MSE Credit Club, members get our unique Credit Eligibility Rating, which assesses you based on a combination of three key data-sets to diagnose how strong your real-world credit power is. They are...

1. Your 'TransUnion Credit Score'. This is the one most people have seen. It is a credit reference agency's assessment of how a typical lender would look at you. Don't see it as a hard or fast fact, but instead a rough illustration of where you sit (so don't stress small moves in your score, but do check out big ones). In the Credit Club, you can view your TransUnion Credit Score for free.
2. Your 'affordability score'. Credit scores don't include the single most important stat - how much you earn. If you've a great history but no money, you will be rejected. In the Credit Club, you can view your affordability score for free.
3. Current market conditions. Lending isn't just about your situation, it's about the market. We factor this in. Thankfully, slightly lower UK interest rates mean things are a little easier, so hopefully a few who have had past rejections may be accepted now.

To review all this, register or log in direct to the Credit Club or, easier, do it via the MSE App (iOS | Android). It also includes a mortgage affordability calculator, cards & loans eligibility calcs, plus bespoke tips on how to improve your credit.

The trio of measures lenders assess you on

Within your credit and affordability scores, there are three calculations made to assess you. We show you yours in the Credit Club, but it's worth understanding them... A) Debt ratio: the percentage you owe compared with annual income. In general, the lower the debt ratio, the better. This is for non-mortgage debt such as cards & loans. Eg, £10,000 of card debt on a £40,000 income is a 25% debt ratio. To improve it: If possible, pay down any debt (or increase your income, though if you could, you'd probably be doing that anyway). Yet lenders do like to see a little debt used, so they can check you're doing it responsibly and paying it off - so a ratio under 1%, especially if you've little other credit data, can be negative. B) Credit utilisation: the percentage of available credit you currently use. Again, lower is better. Eg, if you've spent £100 on a credit card and you've a £1,000 limit, that's 10% credit utilisation. To improve it: To cut it, again, pay off some debt if possible. Though the utilisation isn't important if you've a low debt ratio (ie, the fact you're using most of your credit isn't a biggie if it's only a small part of your income.) It's when you've more significant debt it comes into play. C) Disposable income: the percentage of spare cash left over each month after essentials. This time, higher is better. Essentials include housing costs, debt repayments and other bills you and your dependants must pay. For cards & loans, it's done via a statistical calculation for a typical person in your position, rather than looking at your actual incomings & outgoings, so there's not much you can do to change it.

Step 2: Can you shift existing credit or store card debt to 34mths 0% (22mths if poor credit)?

The key weapon to tackle existing card debts is a 0% balance transfer, where you get a new card that pays off debt on existing card(s), so you owe it instead, but interest-free for hopefully a long period. This means more of your repayments clear the actual debt, not just mostly cover interest, meaning you get debt-free quicker. 

And it works, as Bernadette emailed in April: "Thanks to in-depth info & explanation, I applied for 0% balance transfer, got 23 months. Transferred £2,000 of high-interest debt. Applied for another card and got 20 months 0% to clear remaining £1,000. Am so delighted to finally make headway. Have also set cards to frozen on bank apps. Thank you all so much. [Likely interest saving £600/year.]" To do it...

• Find which top card you're most likely to be accepted for via our eligibility calc. It shows your odds of getting each card BEFORE you apply, minimising applications & protecting your credit score. All links in the tables below go via it. Plus it means if new cards are launched, they'll be included when you check too.
• Go for the lowest fee with a 0% period long enough to clear the debt. Balance transfers usually have a one-off fee of the amount of debt transferred (eg, 3% is £30 per £1,000 shifted). Longer 0% cards usually have bigger fees, so if you can clear quicker, go shorter. Unsure? Play safe & go long.
• Usually rejected when you apply? Our eligibility calc also includes balance transfers for poor credit scorers, and MSE's free Credit Club (available via the MSE App on Apple | Android) can analyse the problem (and includes the eligibility calc too).

Below are the top deals, first for those with stronger credit scores, then poorer credit 0% deals.

Cards for poorer credit scorers, with a quick warning...

Balance transfer cards that accept those with poorer credit scores tend to have higher 'go-to' rates, which is the APR the card jumps to once the 0% ends. So it's especially important here to check how that rate compares with the APR of your current card.

If it is higher, ONLY move an amount you're sure you can repay within the 0% period, or you could be stuck paying more interest after. If it's the same or a lower rate, shift as much debt across as you can to take advantage of the 0%.

Getting a card? Follow my Golden Rules...

1. Clear debt before the 0% ends. Pay it off or balance-transfer again before the 0% ends or you'll pay the far-higher rep APR.
2. Never miss the minimum monthly repayment. Or you can lose the 0% rate. Best to set up a Direct Debit for at least the minimum, then make additional manual payments on top to clear the debt.
3. Don't spend/withdraw cash on the card. It usually isn't at the 0% rate, so will be expensive and it's best not to build up more debt.
4. Check how long you've got to do the transfer. If you don't do it as part of the application, you've normally 30 to 90 days.
5. Try to avoid further borrowing. Unless you're a stoozer, if you're doing a balance transfer it means you've a decent chunk of debt. So, it's a signal to think carefully before borrowing any more (especially if it's a poor credit transfer). Consider doing a money makeover and a budget.

The most frequent questions I get about balance transfers (oh and the answers too...)

I've been talking about this for over 20 years, and had more questions than I can shake a maraca at...

Q. Should I apply if my best eligibility score is only 20%? Cutting debt costs is important (usually only trumped by a mortgage application), so go for it. While 20% odds are low, it means it's likely two in 10 applicants will succeed, and it could be you. If you are rejected, barring a minor credit-file application mark, you're no worse off. So the upside massively outweighs the downside.

Q. What if the credit limit isn't high enough for all my debt? If you get accepted for a card but the credit limit isn't big enough, the application's already on your credit file - so shift as much of your highest APR debt as you can to the new card (usually they cap it at 90% of the credit limit). Then once done, use our eligibility calculator to see your chances of acceptance for other providers' cards to move the rest.

Q. Can a balance transfer hurt my credit score? While shifting a balance from one card to another isn't recorded on your credit file, a footprint is added to your file every time you apply for a new credit card. Multiple applications, especially close together, and high outstanding debts, even at 0%, can affect your ability to get further credit.

Yet don't let that put you off. This isn't a flippant application. Cutting expensive debt costs is one of the reasons you try to build a good credit history. If you like, it's 'worth spending your credit score on'. See our Credit scores guide for full information.

Q. What if the eligibility calculator says 'no chance' for all cards? That makes things difficult. Our calc is only an estimate based on the info we get from firms, but it likely means rejections from all those we include, and as that includes poor credit scorers' cards, it likely means acceptance anywhere will be tough. There are still other things you should look at doing though - keep going on to the next steps...

Step 3: Pay off debts the right way (even if you can't get 0% balance transfers)

Some try to repay their biggest debt first, or spread repayments equally as it feels psychologically better. Yet I'm a Money Saving Expert, my aim is to minimise your costs and it's the debt with the highest interest rate (APR) that's growing most quickly and costing the most, so I very strongly think that's the priority to pay off.

It's worth noting you can sometimes use existing cards to move debt to where it's cheapest too. Some may give you 0% deals for a short time, yet even if not, if you've two cards, one that charges 20%, one 30%, and you're not at your credit limit, you may be able to ask the 20% card whether you can shift some debt from the 30% card to it. That would help. Ask your lender whether it'll do it, and see the credit card shuffle for how it works. Putting all this together...

1. Move all debt to where it's cheapest using 0% balance transfers or existing-customer balance transfers.
2. List all your cards and overdrafts in APR order (loans too, though that's more complex - see existing loan help).
3. Focus all spare cash on clearing the highest-rate debt, paying just the minimum on all others. Once it's clear, focus on the next highest rate, and so on. This will get you debt-free quickest.
4. If your overdraft is the most expensive debt (and at a typical 40%, it may well be) then just pay the min on all cards, and make sure any spare money is reducing the overdraft (see 9 tips to cut overdraft costs).
5. If you've a 0% card soon to end that'll go to a hideous rate, at that point you may want to push to clear it first.

All this can make a big difference, as John kindly emailed us last month: "I did have a good, well-paid job, and could easily afford to pay off the credit card in full each month. Unfortunately, I lost that job, and although I cut down on luxuries and non-essential costs, got into not paying off in full - and the interest started building up.

"I thought I would get out of the spiral in time. Obviously, it became harder month by month. Took Martin's advice and started moving debts around reducing the highest interest first. I couldn't get 0% offers to begin with, but promotional deals from the providers of cards I already had.

"Over time, I've reduced the debt each month, by paying the minimum each month and saving what was available each period to then pay that at the end of the promotion. It's taken time, but from a bad position of owing almost £10,000 on credit cards, I'm now within a month of paying it all off with 1 final payment." [Huge congratulations John, it takes hard work and discipline. This will inspire many - Martin.]

"Thanks a lot for the advice, Martin, it's worked wonders including my mental health each month wondering whether to pay Peter, Paul or another debt. Looking forward to the future where the money that was going on repayment can now go into savings & a long overdue holiday."

Step 4: Ten tips to (re)build creditworthiness

Now let's move on to the future. None of these tips will help you today, but building yourself a history as a better credit citizen will accelerate your debt cost-cutting in times to come and hopefully let you minimise debt, too.

There are bespoke tips in the MSE Credit Club, but I wanted to run through some general concepts that can make most more attractive to lenders, though there's no universal fix - as just like when you're on the pull, different people/lenders fancy different things. Yet in general...

1. Get on the electoral roll. If not, getting credit's tough, as it can cause ID and tracing issues, so sign up to the electoral roll (you can still opt out of the 'open register' to avoid junk mail). If you're from overseas, it's trickier, so see help for foreign nationals.
   
   
2. Never miss or be late on repayments. Use a Direct Debit to be sure, even if just the minimum (then manually repay more on top).
   
   
3. If you don't have, or have never had, credit, start with crap credit and use it well. Lenders credit-score you to predict your future behaviour based on your past. Yet if you've no credit history, they've no data to assess, and you'll usually be rejected. If so, one way to start is to get a credit rebuild card or something similar.
   
   The interest rates will be hideous, but spend £50 to £100 a month on it (just your normal spending, eg, supermarket) and pay it off IN FULL each month so you don't pay the interest. That way you'll gradually start to build a credit history. 
   
   
4. Use consistent answers on every application (eg, job title). Evidence of stability's good, so don't alter your job title or put different bank or mobile numbers down (unless they've changed). Too much variance can also trigger rejection from fraud checks.
   
   
5. You can hold hands, snog, live with or marry who you like... just be careful if you get joint products. Even marriage won't link your credit file with someone else. ONLY joint products (mortgage, loan, or even a bills bank account with flatmates) can, then lenders can assess their history too. So, avoid if they've had issues. If you're no longer with someone you were linked to, see how to de-link your finances.
   
   
6. Check your credit file at least once a year and before any big applications. It's important to go through line-by-line, as errors can kibosh applications. Worse still, if you get wrongly rejected due to an error, that application will be on your file anyway making things worse in future. See how to check all three credit reference agencies' files for free.
   
   
7. Ensure you time it right. Major problems, such as County Court Judgments, defaults or bankruptcy, stay on your file for six years. Applications for products stay on for one year. So, if you're nearing a point where things will soon lapse (your credit file will tell you), try holding off applying until they do.
   
   
8. Buy now, pay later (BNPL) is increasingly appearing on credit reports, so timely repayment matters. The three credit reference agencies now add data about firms such as Klarna and Zilch, so on-time repayments should boost your credit history, while late repayments may harm it. And in future all BNPL firms will likely be doing this, as it's becoming regulated, so this gets more important. See how BNPL works.
   
   
9. Wait to do little applications until after big ones. Too many applications too quickly can be negative, so space out and prioritise applications, eg, if you're soon applying for a mortgage, don't apply for more trivial products such as cashback credit cards or switch bank account in the month or two before.
   
   
10. Don't withdraw cash on credit cards. It's expensive & evidence of poor money management (for a possible exception, see Withdrawing cash abroad).

Step 5: Struggling to cope? Get free debt help

The solutions above all involve you being in a functional relationship with your debt, ie, you can afford to repay and just want to cut the cost. But for some, a different tack is better - full help in our Debt crisis help guide. I have three questions to ask...

- Do you struggle to meet minimum monthly payments?
- Is your total debt (not mortgage/student loan) over 1yr's salary?
- Do you have sleepless nights or depression/anxiety over debt?

If you answer 'yes' to any of these, forget the solutions above, and instead get free, one-to-one debt-counselling help from Citizens Advice, StepChange, National Debtline or CAP (which gives emotional support too).

They're there to help, not judge. The most common thing we hear after is: "I finally got a good night's sleep." Just go for it, read inspiring stories in our Debt-free wannabe forum, and also see our Mental Health & Debt guide.