Things to do before applying for credit

Aside from paying your accounts on time, settling unpaid account (being aware of the dangers) and removing any judgments from your credit record, it is essential that you also take other action as part of your strategy to save on interest.

First, by law you are only entitled to the credit that you can afford. That means that should you have an existing credit facility that you do not use, such as an Edgars store card, this should be closed as the credit provider must take this facility into account when determining whether you can afford further credit. In other words, close those accounts you do not use.

Second, some types of credit such as credit cards or personal loans are revolving, in other words the account gets paid but quickly goes back into credit. In their nature these accounts reflect poorly on you as they imply that you are in regular need of credit. If possible, you should close these types of accounts.


Third, try to avoid debt spiral behaviour. In other words, do not borrow to pay your installments on other credit facilities. Likewise, you should try to pay more than the minimum installment amount on each credit facility as this indicates that you have disposable income. Lastly, avoid expensive debt, such as short term (30 day) loans.

Fourth, whenever you apply for credit an "enquiry" is added to your credit record. This is fine if it is done seldom, but if you make several enquiries for credit you will seem desperate and this will also reflect the possibility that you have already been declined credit. It is therefore best to rather clear your credit record of negative information and then apply to as many creditors as possible on the same day. That way they are unlikely to pick up the enquiries immediately as the enquiry data usually takes a couple of days to reflect on your credit record.

Fifth, if you apply for credit when you have "maxed out" all your credit facilities you will also run the risk of the application being declined or the interest rate being "loaded" (made higher), so ideally, try to apply for credit when you have paid down your existing credit facilities.

Sixth, the fewer different credit facilities you have the better. You do not need to consolidate all your credit but you should aim to reduce your "lines" of credit, as the fewer you have the better.

Seventh, if you are applying for credit with your spouse (or even someone else standing as surety/security), you should also ensure they have fixed their credit record and gone through all of the above tips and done their best to add to the good impression you are trying to create.

Those are the keys tips to ensuring you get credit and get it as cheaply as possible.