How to get a good credit rating
22 Feb 2012
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Glossary
APR
Annual Percentage Rate – the amount you're charged for borrowing made up of the interest rate and any standard charges. Since most credit cards don't have an annual fee, the APR is simply the cost of borrowing for a year. If your card has an annual fee this will be included in the APR calculation along with the interest rate.
Balance transfer fee
This is the amount that a credit card provider will charge you for transferring your balance (the amount you owe) from an existing credit card onto your new card.
It is typically just under 3% of the balance being switched, for example, £90 on £3,000.Cash withdrawal
Taking money out of a cash machine using your credit card is known as a cash withdrawal, but it's not advisable. In most cases, you'll be charged a fee for this service and the interest is usually far higher than the rate charged on purchases.
There's also no interest-free period, so even if you pay your bill off in full on time, interest will still be charged on the cash withdrawal element.Card issuer
This is an industry term for the credit card company which provides you with a card. It is the issuer which sets the interest rates, terms and conditions of using the card.
Charge cards
With charge cards, you have to pay your bill off in full each month - even though they are used in the same way as a credit card.
Many of them come with an annual fee, high spending limits and good benefits such as free travel insurance and concierge services.County Court Judgment
County Court Judgments (CCJ) are rulings for unpaid debts made by County Courts in England and Wales (Scotland operates a separate legal system).
A CCJ will be logged on your credit record and will count against you when you make any applications for financial products, like credit cards, loans, mortgages or bank accounts.Credit limit
A credit limit is the maximum amount of money a financial institution will agree to lend to you. With credit cards, it's the most a card provider will let you borrow at any one time on a particular card.
Credit score & rating
Your credit score, also known as your credit rating, measures how reliable you are as a borrower by looking at your credit history. It is found on your credit report which all lenders access via one of three main credit reference agencies when you apply for credit.
The lender – in this case the credit card company – will then use the score to decide whether or not to accept your application for a credit card and what your credit limit will be. You can find out your credit score by applying for your credit report.
Footprint
This is a mark left on your credit record every time you apply for any form of credit such as a card, personal loan or overdraft.
Too many footprints and lenders you are applying to will start worrying that you are desperate for credit and are likely to reject you.Some allow you to do a 'soft' application, which means no footprint is left on your record so it's not damaged unnecessarily.
Foreign exchange fee
This is the amount added on to your overseas spending on your credit card before it is converted into pounds. It's also called foreign exchange loading.
Credit card companies get a wholesale foreign exchange rate for currencies worldwide from the international card scheme they belong to – such as MasterCard and Visa – and add on their own percentage before converting your spending back into sterling. This can add up to 3% to the exchange rate you’re given.Surcharges
When paying by credit card, the retailer can add on a fee known as the surcharge for the convenience of paying by card, typically a percentage of the price.
They are typically charged by travel companies such as airlines and train companies. These companies often charge for paying by debit card too, but it's usually much lower.Minimum payment
Also known as the minimum monthly repayment (or MMR), this is the smallest amount a credit card provider will allow you to repay every month.
Typically this will amount to 2% of your outstanding balance, or £5 – whichever is greater. Paying just the minimum balance is the most expensive way of repaying your credit card debt in the long term: Just a fraction of the repayment is put towards the debt with most of it going against the interest.Penalty charges
These are charged for minor misdemeanours such as paying your bill late or your payment not clearing.
Since the Office of Fair Trading stepped in and told credit card companies to lower their charges, these are usually levied at £12 a time.Compare Credit Cards
