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What should I consider before applying for a credit line?

What is a credit line?

A credit line is an ongoing form of credit which you can use to borrow money as and when you need it. You apply for a credit limit and, if approved, you can transfer funds into your nominated bank account. You will need to make monthly repayments towards your balance, but your repayment amounts are flexible to help fit your needs and your budget. As long as you comply with the terms of your credit agreement, you can continue to make further transfers of any amount over £25 up to your credit limit at any time. For further information read our article on the benefits and limitations of a credit line.

What is the application process like?

You apply through a straightforward online credit application form. You will need to provide your contact details and information about your income and expenditure as well as your bank details and debit card details. If your application is approved, you can transfer the money to a nominated bank account straightaway or as and when it is needed. You will only pay interest on the amount of money that you draw out of the credit line, not on the total credit limit agreed, and repayments can be tailored based on your current financial circumstances, subject to at least the minimum monthly payment being made each month that you have an outstanding balance.

How can borrowing from a credit line impact my credit score?

A credit score is a statistical number used to evaluate your creditworthiness in relation to your historic ability and responsibility to repay debt. The three Credit Reference Agencies in the UK - Experian, TransUnion and Equifax, all use different metrics to assess your credit score, but generally the higher the credit score, the more creditworthy you are considered.

As with any financial product, borrowing money from a credit line can have an impact on your credit score. Whether this impact is positive or negative is simply dependent on how you use the credit line.

Although, a large combination of factors may impact your credit score, the top three factors you should consider before applying for a credit line are your payment history, your credit limit and number of hard enquiries.

Hard enquiries

Every time you apply for credit, the lender will review your credit history as part of their decision-making process. This review appears on your credit report and may influence your credit score. Applying for several form of credits in a short period of time may have a negative impact. A credit line may mitigate this issue as it is a form of revolving credit, so once your application is approved the lender will not submit further hard enquiries for each credit transfer.

Payment history

Payment history can be the most important factor contributing to your credit score, as lenders want to see clear evidence that you are a conscientious borrower with the ability to repay. To demonstrate financial responsibility, you must pay the money that you borrowed on time. Missed payments could have a severe impact on your creditworthiness and affect future credit decisions. A credit line offers more flexible repayment options, though there is a minimum amount which must be repaid each month for your Polar Credit account to be considered up to date.

Utilising your full credit limit

The lender will usually set a maximum credit limit for your financial circumstances. When drawing funds from the credit line, your credit limit will restrict the amount you can borrow. It may be tempting to use all the available credit due to ease of access; however, you should be aware that your credit utilization ratio accounts for a large proportion of your credit score and may have a significant impact on it. In order to keep a high credit score, it is important to be a responsible borrower and only use what you need.

Is a credit line the most appropriate solution?

Credit lines, as any other financial product, can be used appropriately and inappropriately. Borrowing from a credit line can effectively help month-to-month cash shortfalls, however, misuse may result in financial difficulty.

If you don’t stick to the terms of your credit agreement, there could be severe consequences and we may:

Other forms of credit, such as a payday loan, a guarantor loan, a credit card, an overdraft or borrowing from friends and family, may be more suited to your individual circumstances. Read more about the benefits of using a credit line and when to consider the other available options.

Why choose Polar Credit?

At Polar Credit we offer a new solution to your credit needs. We created Polar Credit to provide you with access to credit in a fast, easy and transparent way. Polar Credit is a revolving credit facility that can help with your monthly expenditure. An account with us lets you withdraw funds when you need to, with cash transferred to your bank account within minutes of approval.

We know what matters to customers when they are looking for credit – a simple online application form, a quick decision and fast access to cash. Our credit line brings all of this together in an easy to use and transparent product.

More information

How much will I pay for using Polar Credit?

What are the application criteria for a Polar Credit Line?

Can you help me with budgeting and debt advice?

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Representative Example: Amount of credit: £1200, interest rate: 49.9% pa (variable) and 1.65% transaction fee. Representative 68.7% APR (variable)

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