AIBU to ask for advice on credit cards and credit scores?

[OkZoomer]

Got a quick credit score query, as I’m looking at applying for a mortgage over the next year.

My current score with the main providers (Experian, Clearscore) is decent. To improve my score further, I’m wondering if it’s worth getting a credit card (as I don’t have one at the moment).

I’ve put off getting a credit card as I’ve never really needed it. Would it be worth getting one though in case it may be useful for my credit score?

I also get that credit cards can be helpful as they offer protection when making big purchases, so that might also be helpful in the future.

Thanks!

As long as you can trust yourself not to abuse it. Buy a supermarket shop once per month with it and then pay it off as soon as the statement comes in.

Credit scores are pretty useless but as long as you have no missed payments, aren't carrying loads of debt then you'll be fine.

Credit scores are useless, the mortgage company isn’t going to care about that. If you have never had any credit before though, then you’ll have no history. In this regard it might be worth getting a credit card and like @slashlover says, making a couple of purchases and paying off every month.

Yes, it’s worth building up a credit history even by buying a few small things - the main thing is to ensure you pay everything off in full every month.

I find Martin Lewis’ stuff helpful:

www.moneysavingexpert.com/credit-cards/

Your credit scores are just numbers plucked out of thin air by people that aren't involved with any lending decisions.

It's your credit history that is important and yes, having a credit card which you pay of in full every month will improve your repayment history.

Thanks all, I didn’t actually realise credit scores were so arbitrary and not based on anything, so that’s really helpful to know.

I’m aiming really to improve my chances of getting a mortgage, so would it be worth getting a credit card just for that?

Slight thread diversion, but is there anything else I should be doing to improve my mortgage chances?

I’m a couple of months off saving my full deposit, which would cover just over 15% of my house budget.

I work full-time in a reasonably stable job, which I’ve been in for about 2 years, and have payslips to show a mortgage provider if needed. I also budget quite carefully each month to avoid going into my overdraft.

Any other things I should be doing?

Mortgages tend to have a different set of criteria for their credit assessments than normal finance. As the loan is secured against the property the lender is more interested in affordability, but you still need to have a clear and well paid credit history (no missed payments, defaults etc). It will help your application to be registered on the voters roll too.

A credit card would be a good thing to have to build up credit. Make small, regular payments and either make the minimum payment, or pay it all in full each month. If you get one and never use it then there won't be a payment history to show.

Regardless of credit scores you really should have a credit card to pay for big ticket items for the added protection in case anything goes wrong.
Lots of people who weren’t successful in getting refunds on holidays last year were able to do a chargeback if they’d paid on their credit card

As other posters have said, credit scores and credit history are two different things. Credit scores can be an indication of your credit worthiness but they aren’t looked at by potential lenders. Credit history is the important factor in decision making.

It sounds like you already have a good understanding of mortgages and you’re in a good position to be applying for a mortgage. There’s possibly a few other things you could do to ensure your chances of being accepted for a mortgage application are as high as they can be.

If I were you, I’d be checking my credit file and making sure the information recorded is correct. It’s also a good idea to reduce any significant debt you may have (if you do) as this can impact on your monthly outgoings thus reducing your affordability.

Good luck

Thanks very much everyone, this is really useful.

I’ll definitely look into getting a credit card, as it will be worth building up credit history and also using it to pay for any big things - holidays, any house appliances etc - in future.

A couple of posters mentioned mortgage lenders will check my credit file when I apply for a mortgage. I think this is linked to my credit score - is that right, or is a credit file completely different and separate? I think I remember seeing my credit file when I’ve checked my credit score on Experian, but I could be wrong. When I’ve looked at what I believe to be my credit file, there are no missed payments on there or anything, and I’m also on the electoral roll at my current address.

Also, another quick question - if I’m looking to buy a house in the next year or so, is it worth me applying for a credit card now? I know credit card companies do a credit check, which has an impact on my credit file and it might get flagged to the mortgage lender when I apply for a mortgage.

There's a first time buyers guide on Martin Lewis money saving expert site that provides a lot of useful info.
Apart from that, my top tip is don't apply for any mortgages directly as each time you get turned down it worsens your credit rating. And things are insanely strict currently due to covid so you are quite likely to get turned down especially with only a 15% deposit. Instead, go via a mortgage advisor (no cost to you, and they can see the whole market) to get a decision in principle that you can then use to view houses and put in offers. Generally they will lend up to 3.5 times your salary and as well as a deposit, you need to save enough for the costs which may be a few thousand.

Thanks Snack! Really good point about my deposit - I’ll definitely focus on saving more in the next few months. I was hoping 15% might be okay, but I realise the bigger the deposit, the more chance I have of getting a mortgage.

If you get a credit card, get one that gives rewards or cash back, and set up a direct debit to pay it in full every month.

15% used to be a good deposit but things have changed recently unfortunately!

Credit 'score' is a useless number that is made up by credit reference agencies to convince mugs to part with their money on a monthly basis so suckers can improve this made up number, and it pays well.

Your credit history is what lenders look at, do you pay your bills on time, how much debt are you in, how much income you have and how you manage your accounts.

Lenders do not see any made up credits scores

Above advice is good. Also don't splash out on anything unnecessary over the coming months. They look at affordability, and your outgoings and what is left. It's good to have some spare capacity so the lender can see that if rates went up (and in the past they've been really high) you would cope.

Yes , getting a credit card is good but don’t use more than 25% of your credit.

I’ve had mortgage lenders specifically tell my mortgage broker which ones they use (ie equifax, Experian or credit Karma). You can get free versions of all of these so not a scam.

Having a 0% credit card at all times is a good idea of you can manage it responsibly anyway due to the additional protections you get. Don’t open more than one every six months as that will impact your score.

@OkZoomer

Also, another quick question - if I’m looking to buy a house in the next year or so, is it worth me applying for a credit card now? I know credit card companies do a credit check, which has an impact on my credit file and it might get flagged to the mortgage lender when I apply for a mortgage.

Yes, apply now so that you have a good year+ worth of payment history with it.

Every bit of credit you apply for will leave a search footprint on your credit file - this only gives lenders cause for concern if they can see you have been applying for a lot of credit in a short space of time, especially if you don't have any new finance to correspond with the searches as it indicates you've been declined for credit recently. I am an underwriter for a finance company, not a mortgage lender so their rules will be different, but our policy rule is no more than 2 separate credit searches in one calendar month. So provided you don't go applying for a lot of credit close to your mortgage application, they won't see previous searches as a concern

If you've never applied for credit before, you may find you aren't eligible for some credit cards. It's worth using an eligibility checker before applying, to avoid getting rejected. The eligibility checkers perform a soft search on your credit history to see if you're likely to be accepted - only you can see soft searches, lenders can't. Some credit card providers have their own eligibility checkers on their website, or Martin Lewis' Money Saving Expert website has one: www.moneysavingexpert.com/eligibility/credit-cards/

Anecdotal, but I got told by someone that as they paid off their cc in full every month, this didn’t give them any credit history to use.

Thanks everyone!

Nomnomargh - that’s really interesting to hear. It’s things like that which make me wonder how worthwhile it is to get a credit card (apart from the protection a credit card can give for buying expensive appliances etc). I understand it’s best to pay off credit card bills monthly, to avoid getting charged by the credit card company and getting cc debt, but it’s surprising to hear it might not build credit history. Has anyone been in a situation where they’ve paid off their bill monthly and haven’t built up credit history? Surely the fact you’re regularly using a credit card will help to build up credit history though?

@OkZoomer

Got a quick credit score query, as I’m looking at applying for a mortgage over the next year.

My current score with the main providers (Experian, Clearscore) is decent. To improve my score further, I’m wondering if it’s worth getting a credit card (as I don’t have one at the moment).

I’ve put off getting a credit card as I’ve never really needed it. Would it be worth getting one though in case it may be useful for my credit score?

I also get that credit cards can be helpful as they offer protection when making big purchases, so that might also be helpful in the future.

Thanks!

It’s worth it provided you can repay in full each month, and don’t use the whole limit.

You can pay it off monthly and build up a credit score but you need to wait until it says your bill is due - usually the next month. Where people don’t generate a credit score it’s when they pay it off immediately e.g a couple of days after they’ve spent it. This way it essentially looks like they never use their credit card as the balance is always zero. If you wait until the bill is due then you will still never pay interest but it registers on your credit report that you have a balance that you are paying off.

Ahh that makes sense Trisolaris, thanks.

I’m really new to this, so am wondering if I’ll get a letter or an email telling me when my bill is due? And what’s the best way to pay the bill off - would it be best to set up a monthly direct debit that leaves my account on the bill’s due date?

Usually it asks you whether you want to set up a direct debit when you activate the card and gives you three options: the minimum amount, a set amount, or the full balance. To build credit you can go for paying off the full balance.

You usually set up for a set day each month.