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AIBU?

AIBU - My credit rating will never improve!

26 replies

binkyblinky · 07/06/2020 18:28

Hello! After some general advice on how to improve my credit rating.

Five years ago I came into a large sum on money and cleared all of my debt (it was about 20K)

At the time I had a next account with about 2k on it, which I cleared. Stupidly I didn't close it, and spent it all again.

In the last month I have cleared the next account back to zero. I also cleared my Very account which was at about £1000 following Christmas gifts.

Despite paying well above the minimum, my credit rating had been falling and falling and was In the 'very poor category.

I paid for a credit file check and found an old default - five years ago for Orange mobile phone for £25!!!! It has been listed as default for 5 years. I didn't even know about it. I've paid it now, and the default company had my current address but didn't bother to write to me to Chase the debt.

I had another default for £101 following a dispute with Vodafone, this was paid a month ago as well.

I have a £200 overdraft, no loans, credit cards or car finance.

I appreciate I'm extremely lucky at 41 to have no debt at all.

I want to improve my credit rating. How do I do it. I need to close the next account as I'm not strong enough to resist temptation and not spend. Is there a way it will get better if I just keep my credit at zero?

I've fought with my mental health so much I really struggled to manage my finances. Finally, mentally I've started to become well, but I am still paying for being too ill to manage my finances. It would make me so happy to have a 'good' credit rating for once in my life.

Any tips appreciated xx

OP posts:
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Treacletoots · 07/06/2020 18:32

Actually OP, having no credit, loans or overdraft could be one of the reasons for a low credit score...

Now you've sorted the defaults, in time that will improve but your credit score is a picture of how you manage credit, and it sounds like you're very similar to me with self control.

However keeping small balances on a few credit commitments, say, no more than 25% of your total available credit is the way to build your credit score provided you keep them low and keep up with repayments.

I would question though why you care. If you're not planning to take out a new mortgage, or other loan, you might as well just keep it as it is, your credit score is only useful, if you want to use the credit.

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Thighmageddon · 07/06/2020 18:38

Ideally you need to keep your credit accounts open and make sure if you spend then no more than 25% of your total credit is used and then cleared monthly.

Or apply for a credit card and use it to pay for smallish purchases and pay the balance monthly.

I find websites like Clearscore useful for keeping an eye on your credit score, only free versions though.

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binkyblinky · 07/06/2020 18:38

Well, we are hoping to move home soon. We knew I wouldn't be accepted onto the mortgage for the new house, luckily my husband has been approved for it all.

But one day I would like to be on the same mortgage. We keep our finances separately. He is very very very good with money and I'm the opposite!

My aim one day is to be able to go onto the mortgage as well. X

OP posts:
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LellyMcKelly · 07/06/2020 18:39

You need to build up a pattern of well managed debt if you want a good credit rating. Being debt free is actually a disadvantage when calculating your credit score. If you are able to, start by buying small things THAT YOU NEED (!) on interest free credit. Amazon often allows you to pay for things in instalments for example. Or you could get a credit card. With your credit rating you will struggle to get one with a good interest rate, but even with a poor one you won’t be charged interest as long as you pay it off every month. You can ask them to set it at a very low level - say £200 a month and all you do with it is buy your groceries. I have a mortgage, a car loan and a few bits and pieces on Amazon on credit, but I’ve never defaulted on a payment and I have some savings, all of which tells lenders that I am a safe bet.

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NotExactlyHappyToHelp · 07/06/2020 18:41

I use a credit card for my food shopping and pay it off in full every month. It has massively improved my credit rating. I started out with no credit which is just as damaging to your credit score as bad credit.

I’m very careful to only buy what I’d be buying on my debit card and make sure I’ve more than enough to cover clearing it monthly.

Is your name on the rent/mortgage and utilities?

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Northernsoullover · 07/06/2020 18:42

I've had an IVA which has been paid off. I have just taken a credit card to rebuild my credit rating but I never spend more than 30% of its limit and pay it off in full every month.

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blubberyboo · 07/06/2020 18:43

The Defaults will drop off 6 years from date of default. So orange will drop off next year and the Vodafone 6 years after it was registered. This will help.
If you can then get added to the mortgage this will help build a pattern of good payment and shows home ownership

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HavelockVetinari · 07/06/2020 18:45

You could contact Vodaphone and ask them to remove the default? If it was a genuine dispute it shouldn't be there, usually if you explain why it happened they'll remove it.

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binkyblinky · 07/06/2020 18:46

It's interesting isn't it, the only
Way to improve credit rating is to borrow money!

So ... I need to find a credit card company and then use a small amount of it to pay for regular things, and then pay that off immediately! I'll never find a credit card!

Arghhhhh

(Yes, I'm on rent ant utility bills and voters register)

OP posts:
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NotExactlyHappyToHelp · 07/06/2020 18:49

It’s annoying isn’t it? I always thought that by not using credit I was doing the responsible thing.

You will get accepted trust me. I got a Capital One card with a £500 limit to begin with. They have an app which makes it really easy to manage my spending and repaying.

As a PP said Clearscore is really helpful and free.

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Thighmageddon · 07/06/2020 18:50

binky make sure you use a site that does a soft search on your potential eligibility to get a card first, the soft searches don't show on your credit file and will give a % of how likely you are to get approved.

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raspberryk · 07/06/2020 18:53

If you've paid the default and you didn't get a bill can you ask the company to remove it from your credit file? It drops off at 6 years anyway so if you have a few of these unpaid bills and defaults as they are they have less impact and your score may jump up massively when they're spent.
You shouldn't need to pay for your credit file. There is free access to your file from each of the major 3 credit agencies easily available. Check them all thoroughly.
Use some credit.
My credit score was shocking a few years ago and now it's 998 on experian. Not as good with one of the others for some reason. I'll start trying to work on it a bit more 6 months before I want my mortgage if I need to.

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Mammabee20 · 07/06/2020 18:57

@Northernsoullover- can I ask if you don’t mind how well that goes? I’ve had contact from an agency regarding debt and mine is quite high solely in my name even though my fiancé and I both use the card. He didn’t have any that’s why it is in my name. If you are on mortgage do you have to sell? Are you penalised for having one? And do you have to make it common knowledge to like friends and family?

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Giespeace · 07/06/2020 19:33

I’ve found creditkarma.co.uk very helpful. Signed up last year on the advice of financial advisor who was helping us with our mortgage, ideas insurance and so on. I’d just been keeping a lazy eye on my Experian score before then.
The Karma report breaks your credit score down into factors and uses a traffic light system to show where you are losing points and what to do about it. Takes out a lot of guess work.

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shazshaz · 07/06/2020 19:47

You could keep the Next account and ask them to reduce the amount of credit. You choose the amount, make sure its something manageable.

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Alsohuman · 07/06/2020 19:52

You can get a credit card designed for people in your situation. Get one with a tiny limit, pay for your groceries on it and pay it off every month.

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Fancyateapottea · 07/06/2020 19:54

Defaults will drop off your credit report after 6 years. To build your credit rating you want to have credit but make sure you utilise less than 50%. Also make sure you’re registered on the electoral roll (this is really important) and have as few credit searches/ applications as possible. If you need new credit to build your rating apply sooner so your rating can bounce back before you apply for a mortgage.
If your rating still isn’t great when it comes time to apply for a mortgage I recommenced using an independent broker that will look at acceptability criteria for different mortgage companies etc.

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Thighmageddon · 07/06/2020 19:56

@Fancyateapottea

Defaults will drop off your credit report after 6 years. To build your credit rating you want to have credit but make sure you utilise less than 50%. Also make sure you’re registered on the electoral roll (this is really important) and have as few credit searches/ applications as possible. If you need new credit to build your rating apply sooner so your rating can bounce back before you apply for a mortgage.
If your rating still isn’t great when it comes time to apply for a mortgage I recommenced using an independent broker that will look at acceptability criteria for different mortgage companies etc.

Have you actually read the thread and the OP's replies?
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Poshjock · 07/06/2020 19:58

www.moneysavingexpert.com/loans/credit-rating-credit-score/

Martin Lewis is brilliant for advice on how to manage these things.

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Lostmyshityear9 · 07/06/2020 20:01

My rating was at rock bottom following my divorce and default after default 10 years ago. It is now way higher than average (if any of the free report companies are to be believed). I have done nothing at all other than make sure everything is paid on time, every time. I have one credit card that I sometimes use but pay back immediately and an account with JD Williams which I sometimes put stuff on and pay back over a couple of payments.

Put all your credit cards or accounts that will affect your rating onto direct debit and keep your account in the black.

And at the risk of sounding like my mother, if you don't know how much you've got in your purse, you've either got too much money or you're irresponsible. It's my mantra anad it works.

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Fancyateapottea · 07/06/2020 20:10

I may have missed where OP said she was already on the electoral roll thighmageddon. I stand by the rest of my advice.
Is there any need to be so rude when I’m trying to be helpful and offer advice?

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slashlover · 07/06/2020 20:14

So ... I need to find a credit card company and then use a small amount of it to pay for regular things, and then pay that off immediately! I'll never find a credit card!

Don't pay it off immediately, wait for the statement and then pay it off.

I have a savings account specially for it. If I spend £10 on my card then I transfer £10 into the savings account then when the bill comes in I pay it off immediately with the money.

Second going to the moneysavingexpert website, the forums are full of helpful people who know what they're talking about.

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slashlover · 07/06/2020 20:16

I also have a direct debit set up to pay the minimum so if something happens I never default or have a late payment. It's £5 usually so I just manually pay the balance minus the £5.

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JaceLancs · 07/06/2020 20:38

I advised both my DC to take out a credit card and set up a DD to pay in full every month and just use for something you would pay for anyway eg food or petrol/diesel
They soon gained very respectable credit ratings
Although I’m not on a huge salary and not great with money I have an impeccable credit rating because I use cards to my advantage and always pay on time and more then minimum payment - some set to pay all - some for very cheap or interest free loans pay off over 6-12 months
It’s quite scary really if I maxed all my cards I could easily buy a house or two!

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KaitK · 07/06/2020 21:04

I've done just that previously, completely cleared all my credit cards with a loan and then maxed them out again.

I got another loan last summer and am actually doing really well improving my credit score, I've got it up to good from a low fair. I second credit karma, I find it a really good website and it's free. It's updated at least weekly so I do check it each week and love seeing my graphs on there showing my debt coming down and my credit rating going up! It also has credit cards and loans you might be eligible for on there.

You can get credit cards with low limits that you can use, as others have suggested, to put some of your normal spending on and then pay it back when you receive your statement. You can get 0% purchase cards but I'm not sure you'd be accepted for them with a poor credit rating. Set up a direct debit to pay at least the minimum back and then you can manually pay more. The day before pay day, anything that is left in my account I pay back to one of my credit cards.

Good luck improving your credit rating!

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