Repair Bad Credit With This Vanquis Credit Card
Recently there has been a blaze of publicity surrounding a credit card called the Vanquis Blue Card which charges those who fail to payoff the full balance every month a whopping 39.9% interest rate.
However, while the media report the super high interest rate there is a silver lining that the credit card offers.
Those with a bad credit rating (from CCJs or Defaults etc) can use the card to help rebuild their rating with the likes of the Credit Reporting Agencies (CRAs) such as Experian and Equifax. And having a good credit rating is the foundation for getting the best personal finance deals.
For example, a person with a good credit rating who's employed will usually have no problem at all borrowing money at the cheapest Best Buy levels. Somebody who is generally always late paying bills will normally have to pay around 1% - 2% more in interest. But somebody with a Default, or worse a CCJ (County Court Judgement) will almost certainly have to pay in excess of 10% with many lenders point blank refusing to business.
The equation is therefore simple;
- Bad or no credit rating = High APR*
- Good or ok credit rating = Low APR
*Not sure what APR & EAR mean? See this article
What If You Have No Credit Rating
Surprisingly rich people often struggle to get credit! This is because they have not borrowed money in the past and therefore have no history of debt repayment. The Credit Reporting agencies are not concerned with how much money you earn or how many assets you have (they are not privy to this information anyway) rather they simply look at past performance of debt repayment.
So a person who has borrowed money and always paid back on time earns many positive ticks against their name. But a person who borrows money and is either late paying it back, or worse misses a series of payments gets black marks. Obviously a late payment is a lesser black mark than the total non repayment of a loan.
So What's The Trick
For people who have no credit rating or a very bad rating think about applying for the card and using it to spend say £25 - £50 a month. Then make sure you pay off the balance IN FULL BEFORE the date required on the credit card statement.
What this will do is not only build a credit rating but one which states that the person is a regular user of credit and a regular settler of the credit which is the main point.
In effect the person uses sound money management techniques which is what lenders like to see. After a year or so of utilising the card in this fashion it's likely that you will have built up enough of a credit history to qualify for much larger and cheaper loans/mortgages or credit card deals.
However, those with serious problems on their credit file will normally have to wait up to 5 years when the Defaults and/or CCJs naturally fall off. But for them this strategy is still a good one to follow because when the defaults/CCJs fall off the recent positive marks will still be there.
Summary
This Vanquis Blue Credit Card is not the card to use for anyone who wants to borrow money, ie not pay off the full balance at the end of every month.
But as we've seen for those intelligent enough to spot the constructive credit rebuilding plan the Vanquis card offer is a good deal. And this is especially the case if you’ve got a horrendous credit rating because the company normally accepts all applications.
One final tip – If you are using the card to help rebuild a credit rating it’s normally very foolish to play around with the last payment date. What we mean is that if the payment date is the 20th don’t try and get clever and pay it on the 15th. Be smart and send the cheque in at least 2 weeks before.
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