The number of pre-approved credit card and loan applications increased for the first time since April as the market opens

Clear score revealed that the worst credit crunch caused by the first wave of Covid-19 may end as credit products begin to return to the market.

The United Kingdom leader in free credit score and credit market said the average number of pre-approved credit cards is now back to 79% of January levels.

The number of loan products is at 62% of January levels, down from just 30% in April at the height of the lockdown.

This increase in the availability of credit cards and loan products is reflected in increased consumer appetite, with 34% of people favoring switching or getting a new credit card and 20% saying they were likely to apply for a personal loan in the next six months.

When asked about the reasons for taking out a credit card or loan, 34 percent said they were trying to improve their credit rating, while 27 percent wanted it as a financial safety net.

The UK government’s leave program is set to end in October, making the risk of further layoffs a harsh reality for many workers, so it’s no surprise that 28% of people prioritize paying off short-term debt .

With a 61% increase in the number of pre-approved credit cards available in August (38.31) compared to July (23.72), the average consumer could save £ 626 by replacing their existing credit card debt with a new one. credit card this month. .

CEO and co-founder of Clear scoreJustin Basini said: “The pandemic has given many an opportunity to hit the reset button on their finances and take the time to organize their spending and pay off any outstanding debt.

“With government and industry financial programs slated to end by the end of October, now is the time for people to make the most of the credit options currently available if they are in the credit market. .

“As the availability of credit products has increased, it is important that consumers fully understand the terms of any products they can purchase to see them through the months to come.

“Our research has shown that the average credit card APR has increased 32% in the past eight months. And with nearly half (47%) of people admitting not knowing the APR on any of their credit products (including credit cards, loans, and mortgages), that substantial APR increase over the past eight months could end up costing unsuspecting consumers. . “

Credit jargon breaker to help consumers make the right choice when choosing credit products.

APR (and APR representative)

APR stands for Annual Percentage Rate. It is the cost of your credit over a year. For example, if there is an APR of 12% on your credit card, that equates to 1% interest per month. So if you don’t refund a £ 100 bill, £ 1 (1% of £ 100) will be added to your bill as a cost and carried over to the next month (assuming there are no charges). additional).

Representative APR is what appears when maps are released. Credit card providers must give the advertised rate or less to 51% of people who purchase the product. When you see the representative APR, you won’t necessarily get that APR based on your credit rating and financial situation.

0% Balance Transfers

You can transfer your unpaid debt from one credit card to another through a balance transfer. There is usually a small fee to complete this transfer, but some balance transfer cards offer long periods of 0% interest on transferred balances. This means that you can pay off your debt in manageable installments without having to pay interest.

Minimum reimbursement

This is the minimum you need to pay to pay off your credit card debt each month. For example, it could be 3%, which means that each month you will have to pay off at least 3% of your card balance.

Remember, paying only the minimum each month means that paying off your debt will take much longer and could cost you a significant amount of interest payments on top of the remaining balance on your card.

Credit limit

When you buy a credit card, you receive a credit limit. This is the maximum balance you can accumulate on the card.

Sometimes your credit card provider can increase or decrease this limit, and the better you are with your credit, the more likely you are to be trusted with a higher credit limit.

As a rule of thumb, it’s a good idea to stay within 30% of your total overall credit limit to demonstrate that you can manage credit well. For example, if your credit limit is £ 1,000 on multiple credit cards, try to use only £ 300 at one time.

Fault

If you default on a debt, it means you haven’t paid it off under the terms of the agreement with the credit provider.

So if you don’t pay off your loan on time, you are said to be in default. Defaulting on payments is one of the behaviors that can have the most negative impact on your credit score, so we always recommend that you set up a direct debit to automatically pay off your credit, or set an alarm to remind you to pay your credit bills.

You can read more about ClearScore here.

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