The basics of borrowing
If you need to borrow money, this whistle stop tour will help you understand the differences between credit cards, loans and overdrafts. We'll focus on their key features and important information to note.
Credit rating explained
We all have a credit file that gives information about our borrowing – if you want to see your credit file you can get a copy from a credit reference agency like Experian. Your account conduct will affect your credit rating, so it's good to know how you're doing.
Lenders use your credit rating to decide whether to lend you money, how much to lend to you, and sometimes, how much interest to charge. Credit is used for more than just credit cards – you might need it to buy a house, apply for a loan or get a mobile phone contract, among other things.
There are a number of ways your credit score can be negatively impacted, such as:
- Applying for credit too often
- Always having a big balance on your credit and store cards
- A history of missed or late payments on your credit cards or loans
- Failing to pay your mortgage on time
Remember, if you get a bigger credit card limit than you want, or if your lender increases it without you asking for it, you can ask them to lower it. This is a good way to avoid the temptation to spend.
Representative examples explained
Assumed credit limit
A representative example is an indication of typical costs attached to credit card or loan and gives potential customers a means of comparison across lenders. In some cases, the credit limit and APR (annual percentage rate) will vary from the example shown, depending on the lender’s credit assessment of you.
Click on each of the terms below to find out what they mean.