When it comes to retail shopping, no-one would disagree that it makes sense to shop around. Other than the potential decline of productivity while wasting hours checking various websites, or sore feet from traipsing around a shopping centre, there are no negative ramifications for wisely trying to save a little money with an informed decision.
But when it comes to comparing credit cards and personal loans, savvy consumers risk harming their credit rating by doing the equivalent browsing.
Ultimately, this comes down a failure of advertisement. Consumers have no way of knowing the exact rate of their loan, as they are only required to advertise a “typical” rate. This rate has to be offered to 66% of successful applicants only, meaning even with excellent prospects, it is still something of a lottery – and one with harsh ramifications for the losers!
In the process of applying for the loan, you’ll have a mark left on your credit file. So if you end up as one of the unlucky ones who don’t receive the advertised rate, you are either forced to stay with the undesirable arrangement or pursue additional loans and risk running the chance of your credit report ending up in an even worse situation. As this is a self-fulfilling prophecy, your odds of getting a better loan grow less likely with every attempt.
As checking credit reports requires a fee, most consumers are unaware of their current status and perhaps have no idea what impact this seemingly wise practice has upon their attempts at building a solid financial future. Others, aware of the unfortunate situation, have petitioned the Office of Fair Trading (OFT) for an improvement to this dire situation, but the status quo is always difficult to change when so many different agencies are involved.
While this is no easy fix for this predicament, wise shoppers can get around the issues by applying an increased amount of caution to their loan and credit card applications. Instead of going for the obviously impressive, highly glamorous bells-and-whistle card that requires a 100% spotless credit record, aim for the ones that will best suit your needs that you actually have a chance of getting. There is no point applying for a card and being unable to pay off the balance by the required amount each month, as this will only hurt your opportunities to get better credit cards in the future.
The investment of a bit of money into a credit card report may be worthwhile should you need to risk a particular card. Reading about the success stories of other card-holders may also give you a better understanding of where you rank on the credit card totem pole. But with so many rewards credit cards on the market today, you should be able to find one that matches your personal interests as closely as a more attractive “general” card.
This article was provided by a guest author from FinancialFacts.org, a financial blog that provides information on credit cards, debt, the economy, and financial news including financial tips and advice.