How can I improve my credit rating

[Doimatter]

I have a bad credit rating. I know that I need to make sure all bills are paid on time. But when I checked on my credit it said I could improve my score by getting a credit card so I done this . Its a low credit limit. I have only had it a month. But I spend say 150. And pay it all back within 2 weeks. Is that the right thing to do?

But also I feel a bit confused as they say a credit card could up my credit rating . But then says it can make it worse if I rely on borrowing?

Any advice generally
Thank you

Why are paying it within two weeks? Just check the payment date and set up a direct debit in good time to pay the bill in full every month.

My credit rating dropped a few points because I have credit cards, but rarely use them. The credit check company I use said that this was because other lenders couldn't see that I could use credit responsibly - apparently not using credit isn't proof of responsibility . I used one of the cards to pay for a plane ticket for later in the year ( I figured if the company went bust it would be easier to get my money back). My credit rating went up a couple of points.

So I think you are doing the right thing, using it and paying off the balance every month.

I do it like that incase I don't have the full amount at the end of the month. So more I pay the less I have to pay at the end of the month

Just pay it when the bill comes in.

To improve credit rating you should never spend more than 30% (or it might be 25%) of your credit limit in a month and it all needs to be paid in full on time. If you spend more than that every month even if you pay it all off in time it can impact your credit score. Google “credit card utilisation”

@RaspberryCoulis

Just pay it when the bill comes in.

I find it easier to do it how I do. But do I harm my credit rating by doing it this way?

Are you on the electoral register at your house? You 100% need to be on it for credit related purposes.

Do you have any county court judgments? (CCJ’s) they do drop away from your file after 6 years but if you have any and you pay them off they will be marked as satisfied, the longer they are on your account (for example it’s better if it’s 5 years old than 1 year old) the less they hinder your chances of borrowing. If you do have any then when they drop off your credit will improve quite drastically.

Pay your credit card (ideally in full) once per month on the statement date, don’t max the limit or even get close to it, that’s what will bring your credit down. They say to not use anymore than 25% of the balance but clear score say 50% so anything up to 50% I find is ok, could you just use it for petrol and top up shops? Then pay it back in full every month. Is it a credit building card?

Forget the credit ‘score’ aswell that’s not important, it’s your credit history. You need to show you are reliable to lend to. So pay all bills in full and on time & don’t default. Etc etc

Don’t apply multiple times for credit as hard searches stay on your file for 12 months, it’s better to use eligibility checkers first as they only do soft searches which are only available to view yourself so no one else sees them. Money saving expert has eligibility checkers.

You can build your credit from a really shit starting point but it takes time spoken from experience

Download Credit Karma and Clear Score, keep an eye on those for a few months and act on the hints that they give you to boost your score.

Credit Karma covers Transunion and Clear Score is Experian.

@danni0509

Are you on the electoral register at your house? You 100% need to be on it for credit related purposes.

Do you have any county court judgments? (CCJ’s) they do drop away from your file after 6 years but if you have any and you pay them off they will be marked as satisfied, the longer they are on your account (for example it’s better if it’s 5 years old than 1 year old) the less they hinder your chances of borrowing. If you do have any then when they drop off your credit will improve quite drastically.

Pay your credit card (ideally in full) once per month on the statement date, don’t max the limit or even get close to it, that’s what will bring your credit down. They say to not use anymore than 25% of the balance but clear score say 50% so anything up to 50% I find is ok, could you just use it for petrol and top up shops? Then pay it back in full every month. Is it a credit building card?

Forget the credit ‘score’ aswell that’s not important, it’s your credit history. You need to show you are reliable to lend to. So pay all bills in full and on time & don’t default. Etc etc

Don’t apply multiple times for credit as hard searches stay on your file for 12 months, it’s better to use eligibility checkers first as they only do soft searches which are only available to view yourself so no one else sees them. Money saving expert has eligibility checkers.

You can build your credit from a really shit starting point but it takes time spoken from experience

Thank you so much for this. OK so I have 2 defaults they both say update 2019. So if I try my best to get them paid ASAP that would help?

Also I have no missed payments for past 3 years up to a few days ago. When I was late paying my water bill but I have now paid it. But will that missed payment still stay there now ? ( I paid it a few days before my credit score update was due )

OP, I work for a credit card company, and I spend the majority of my time speaking to people asking the same question you just did. Are you paying the card off before your statement generates? If so, then what you are doing is making your credit file look like you've not borrowed anything, that won't look BAD but it won't look good. What you need is to spend on it, let the bill generate, pay it in full before the due date. Then you wont be paying any purchase interest, so if you've spent £100, you are paying back £100, not £100 plus interest.

If you were late paying a bill it stays there on your payment record for some time I'm afraid, regardless of your paying it just before your credit score update was due. Do you now have direct debits set up to pay your regular bills?

@Insidelaurashead

OP, I work for a credit card company, and I spend the majority of my time speaking to people asking the same question you just did. Are you paying the card off before your statement generates? If so, then what you are doing is making your credit file look like you've not borrowed anything, that won't look BAD but it won't look good. What you need is to spend on it, let the bill generate, pay it in full before the due date. Then you wont be paying any purchase interest, so if you've spent £100, you are paying back £100, not £100 plus interest.

Thank you so wait until it says payment due . Then pay it all off ? Then that will help start to push my rating up.

Paying them off will help but if you are still paying bills late that will impact it quite a lot. Use no more than a quarter of your credit limit and pay it bang on time, in full every month. Don't keep paying it early in dribs and drabs.

Your credit score is a reflection of your habits. You need to look reliable. You paying a bit here then a bit 2 weeks later and then a bit more when you get paid doesn't look as good as paying the full amount, whatever it is on the same date every month without fail.

I really don't understand the credit rating thing. I took out a credit card just for holidays, to give me extra protection, which I would clear straight away by transferring the money back the same day (I haven't used it for a year or so though) I also had another one which I took out because a friend recommended it for supermarket rewards, but I didn't end up using it at all. The thing is even though I didn't end up using this credit I'd been offered, or paid it back within minutes, my credit rating went down. It's still a great score but I feel it should be 100%. It was less still when I had no credit cards at all (but a long term healthy bank balance). I'm really not sure how it all works.

It goes down when you apply for credit but then back up when you prove you are using it responsibly. Its a bit of a ballache tbh.

@nothingcanhurtmewithmyeyesshut

Paying them off will help but if you are still paying bills late that will impact it quite a lot. Use no more than a quarter of your credit limit and pay it bang on time, in full every month. Don't keep paying it early in dribs and drabs.

Your credit score is a reflection of your habits. You need to look reliable. You paying a bit here then a bit 2 weeks later and then a bit more when you get paid doesn't look as good as paying the full amount, whatever it is on the same date every month without fail.

Thank you so my plan should be:

If I use 100 pounds on my credit card . Pay the full 100 as soon as it says payment due . ( not before its due and not in drips and drabs)

What about the couple of defaults that are updated 2019 should I try and get them paid. Or am I now to late . One is only for 23.00 how on earth I managed that I don't know

Pay the defaults, they will be then marked as satisfied and that is much better than payments still outstanding.

It will take time for it to come through to your credit report though, so don’t expect it to have changed by your next report, it might be the one after.

And yes to the paying CC in full rather than dribs and drabs (I used to do that to be fair to begin with as I thought it would make me look like I was more reliable paying more often 😆) so my credit card app will say minimum payment £x due by x so when I go to pay instead of clicking minimum payment I think it says statement balance or something like that I’ll just click that and pay the full amount outstanding. I read to do that on MSE and I’ve done it ever since.

Good luck, you can deffo sort it all out x

Your water being late won’t give you a default, it’s when it’s several missed payments do you get a default.

The worst that will happen, not sure how they are on Experian etc but clear score it shows 12 months for the year and each month is represented by a coloured dot think it’s blue (could be purple can’t remember without checking) and if it’s missed that month it will be grey dot.

How late did you pay it?

1. Get on the electoral roll
2. Pay all debt off in full each month - they just want to see you can manage credit
3. Don't link credit with anyone you're unsure of
4. Don't forget insurance. I didn't realise that car insurance is essentially credit, so pay this in full annually if you can

Defaults will stay on your record for 6 years and will have the biggest impact- i think its more important you take this time to work on your money management so that this doesn't happen again, than worrying about the technicalities of when in the month to pay your £100 credit card bill. With the best will in the world how you pay that bill is never going to improve your score much until those defaults drop off.

Yes to all the advice after my last post. One thing to consider now though is if you've a low limit, under a thousand pounds, now, you are likely to want to aim to get that higher (as your credit file likes it more if your limit is above that) for most lenders, the way to do that, as well as using is responsibly (so paying on time, not going over limit, paying more than the minimum payment each month so its clear you can afford more than the minimum payment) is to spend the majority of your limit each month.

Now, previous posters are correct that your credit file will tell you to stay below 25%. And that's true if what is important to you is NOW (like, you're going for a mortgage in the next couple of months) but if what's important to you is longer term (say, thinking of a mortgage in a couple of year) then you want to be aiming for a credit limit increase first, as that will overall help your score longer term

Penguinlove is correct in terms of getting those defaults paid off and making sure you handle money well going forward. But that doesn't mean you can't ALSO work on improving the score as much as possible, doing both is the best thing

If I use 100 pounds on my credit card . Pay the full 100 as soon as it says payment due . ( not before its due and not in drips and drabs)

Bingo. Most credit cards will have an app that let's you set up a direct debit for the full amount each month. Mine is due on the 13th of each month so I set the DD to go out on the 10th which gives it 3 days to clear and I don't have to think about it.

Yes to paying off the defaults. That will help a lot in the long term. You won't see it reflected straight away it will take a month or 2 to show so the sooner the better. Remember your credit score is usually a month behind real life.

Electoral roll as others have said, is an easy boost. They also like it if you stay at the same address and with the same bank for a long time.