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What's the best way of running up debt to improve my credit rating?

(16 Posts)
monsterowl Sat 23-Aug-14 14:44:15

I joined Experian for a month's free trial. It says my credit rating is excellent (986) but lists 3 negative factors, which I'd like to address because I'm hoping to apply for a mortgage in about a year. The 3 negative factors are:

1. You have no successfully settled credit account
2. You have revolving credit that has been open for less than 10 months
3. The age of your accounts indicates lenders are likely to view you as higher risk

What's the best way of taking some action to improve these factors? My first thought is that I should get a credit card (I don't currently have one) and start spending on it, settling the balance every month. But a quick look at e.g. Money Saving Expert's info about credit card shows that I'd be almost certainly declined for any credit card, and it says I only stand a 50% chance of getting accepted for the CapitalOne card, which they recommend for people with poor credit! This seems like a vicious circle ... I need to get into debt to show that I'm a responsible borrower, but nobody will give me credit! I don't want to risk having a declined credit card application on my record (as I'm due to move house in October and will need to get credit checked by a thieving tosser letting agent) so I haven't actually applied for anything yet. Can anyone offer any advice about the best way of improving my credit rating?

Very grateful for any advice!

CogitoErgoSometimes Sat 23-Aug-14 17:20:55

Why would you be declined a credit card if you've got a relatively good credit score with only three 'negatives'? If you have a current account that you keep in credit it could be that your bank would recommend you for one of their credit cards. Normally you'd shop around but if you're planning to pay off the balance each month (smart move) then it doesn't really matter which card you get. Do you have an overdraft facility on your current account? Have you bought anything recently that involves a finance agreement or HP?

monsterowl Sat 23-Aug-14 17:34:59

Thanks Cogito ... yes, it's frustrating. I suppose there's some logic in it - maybe lenders don't want to be the first to take the risk of lending to someone with no record of borrowing, even if they have an excellent credit score. (Although I have borrowed in the past, just not recently.)

I've spoken to my bank and they can't guarantee I'd be accepted. I have an overdraft facility, but I'd need to pay interest on it if I used that ... same with finance agreements and HP (not that I have either of those). I guess I was wondering if anyone knew of a credit card where you're pretty much guaranteed to be accepted, or some other way of borrowing where you don't have to pay interest. Paying interest on borrowing seems silly when I don't actually need to borrow ... although if that was the only way of becoming a better prospect for mortgage lenders, I guess I'd consider it!

thatstoast Sat 23-Aug-14 18:19:48

A mortgage will be based a lot more on your actual income and outgoings than pure credit score (that number from experian is mostly meaningless). That and your deposit.

That said, it is good to have some credit. Does you overdraft show on your credit file? Having one but not using it is good.

There's no real damage to applying for one credit card and seeing what happens. Whether you get accepted or declined it's recorded in the same way.

Landlords will just check for CCJs and Defaults, they won't care that you've applied for a credit card. Also they should do a 'soft' search which won't show on your credit file.

Did you do the soft search on MSE? Does it explain why they think you won't get a credit card? Do you have a low income or have you recently started a new job? That can be a big factor.

17leftfeet Sat 23-Aug-14 18:26:49

Is your revolving credit your overdraft? Do you need it?

MBNA cards are pretty good for poor credit scores

monsterowl Sat 23-Aug-14 19:17:50

Thanks for these bits of advice!

I think I have an overdraft facility, but don't think it shows on my credit file, unfortunately. Might check with my bank.

These things about credit card applications and landlord checks are really useful to know thatstoast - thanks. I did the soft search on MSE - that's how I found out I'm only 50% likely to get a capital one card. I don't really have a low income and returned to full time work post-kids just over a year ago .. maybe that's the problem. Will be starting a new job next month too, although more money at least.

17leftfeet Not sure what my revolving credit is! I don't have an overdraft (not one that I use, anyway). Thanks for the MBNA tip smile

TheFutureMrsB Sat 23-Aug-14 19:23:55

What about a catalogue account? You could buy things of small value and get them paid off?

17leftfeet Sat 23-Aug-14 19:53:32

Revolving credit is credit without an end date

Store cards, credit cards and overdrafts usually

OnIlkleyMoorBahTwat Sat 23-Aug-14 20:31:36

Get a credit card and use it for normal spending. Pay it off in full without fail every month (set up a direct debit). Do not take cash out or exceed the limit.

MSE will give advice on which one you are most likely to be accepted for. You might even be able to get a cash back one and earn some extra money for free grin.

If you have an overdraft, try not to use it. Banks like to offer overdrafts but get sniffy if you ever use it confused.

I was refused some product once because I used my overdraft too much. I only ever used the interest free portion and had savings with the same bank of about ten times the overdraft amount.

GoatsHaveStrangeEyes Sat 23-Aug-14 20:42:08

A score of 986 doesn't actually mean anything. And experian are well known for giving out high scores as that's how their scoring card works. Equifax and call credit will give you different scores again and then each lender you apply for credit with will use their own score card anyway.

Cut a long story short, it's kind of irrelevant.

Some credit on your account would be good, a mobile phone contract or a high interest rage credit card (don't use it though).

TalkinPeace Sat 23-Aug-14 21:39:06

I've no idea what my score is
BUT
I have three cards (only one of which is used) with a total credit limit of £20,000
I put absolutely everything on my main card - even milk - as I get John Lewis points
but pay it off in full every single month
they messed me about last month (timings meant I blew my limit) but gave me a credit to apologise
so my account shows I can pay of £10k in a month (except I'd been saving that money up for months!)

throuhflow of cash and keeping up to date are the killer things for rating
but
mortgages are all about provable income now

monsterowl Sat 23-Aug-14 22:20:13

Thanks - some great advice here. Found out I don't have an overdraft agreed, so will ask if I can have one. Also tried to apply for a credit card via my existing bank, but couldn't complete the bloody form because they have my surname spelt wrong - even though it's correct on my bank cards! Morons.

CogitoErgoSometimes Sun 24-Aug-14 07:25:15

Don't use the overdraft because they are bloody expensive even when they are authorised. smile Just have the facility on your account. Definitely get your name corrected btw. Can cause unnecessary hold-ups if you're recorded as two different people. Good luck and I'm sure they'll give you a card.

TalkinPeace Sun 24-Aug-14 15:30:58

TBH I've got accounts and cards in both of my surnames
give them grief for ANY error on their part (compensation is good to)

monsterowl Sun 24-Aug-14 20:13:46

Hahahahahaha ... I hadn't thought about compensation, thanks Talkin! And thanks for the tip about how the misspelling could be serious business Cogito. I don't intend to use an overdraft (or a credit card, come to that) ... belts are tightened and trying to save for a deposit to buy a house, so definitely not looking to live beyond my means.

Sleepyhoglet Wed 27-Aug-14 19:41:46

Can you get a credit card linked to your current account. Go into branch and see what they offer.

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