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Are you a credit unicorn, or a credit donkey?

Are you a credit unicorn, or a credit donkey?

Category: Debt
Author: Lieke Braadbaart
Date: 21/11/2018

Before you apply for a credit card, mortgage or loan, you'll want to do what you can to maximise your chances of getting accepted, and in the case of credit cards and loans to get the best possible rate. An important part of this process is finding out what your credit score is.

Credit unicorns

Credit unicorns (a term first coined in New Zealand) are those with an enviably high credit score – the 'one percenters', if you will – who are therefore highly likely to be accepted for any loan type they may want to apply for. If you have a highly positive credit rating and you're thinking of how to pay for the upcoming festive season, you are lucky to have all options open to you.

For instance, if you're thinking of getting something back from your festive spending, you may already have a cashback credit card at the ready. However, recent news of some welcome changes in the cashback card market means that your current card may not hold the best value for money anymore. As a credit unicorn, you're obviously a diligent borrower who always pays off any debt in full as soon as possible, so it shouldn't be a problem to switch over to a more competitive card deal whenever one appears – just don't wait too long, otherwise the offer might disappear or you might not receive the card in time for Christmas.

Credit donkeys

While real donkeys may have gotten a bad reputation, when it comes to your credit rating you can't go lower than being a credit donkey. If you have one of the lowest possible credit scores, you'll likely have a long road ahead of you before you have improved your rating enough to qualify for a Best Buy credit card, loan or mortgage.

The first step away from being a donkey would be to stop applying for credit, if you're still trying to do so, and take stock of your debts. If you're feeling pressure to spend a lot of money on Christmas presents, now might be the time to pull your loved ones aside and talk to them earnestly about your money situation. If this sounds too scary for you, consider contacting a debt charity first.

With this extra seasonal stress hopefully dealt with, it's time to tackle your debt. While you'll want to avoid lowering your credit rating further by applying for a new card or loan and getting rejected, with some careful consideration you should be able to transfer your debt onto a 0% balance transfer credit card or consolidate it all in a personal loan. The former would give you time to pay off credit card debt without interest adding to it for some time, while the latter can give you a schedule of manageable, set monthly repayments to give you back some control.

Once you're out of debt, did you know there are special credit repair cards that can improve your rating over time? There are even bank accounts without overdraft facilities that can help you keep on track and improve your rating. Of course, all of these helpful methods are only as effective as your ability to keep up with repayments and not be tempted to overspend.

The rest of us

The majority of us will fall somewhere between the donkey and the unicorn. Credit horses, perhaps. Without checking your score on a regular basis, however, you won't know exactly where you fall, which means you won't be able to predict how likely you are to get accepted for that all-important mortgage or credit card.

With different providers using different metrics for credit ratings, it's a good idea to get reports from different credit check providers – most will offer at the least a free trial, while Experian is even completely free – and challenge any mistakes you find. Armed with this knowledge, you can apply for the deal you want with more confidence.

Find out how to improve your credit score

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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