To find the whole credit system very odd

[Partyinfrance]

I have around 3.5k of debt in total which luckily I've started paying off at several hundred a month. I've just got a pay rise and I'm in a stable job so I'm confident I can get it paid more quickly.
Anyway I had a look at my credit score for the first time in a while. It told me ways I could improve it and one of them stated 'having at least £4000 of debt will show that you are able to manage it effectively.'
This was on one of the main scoring systems like Experian.
I was thinking, what? I know the scoring is weird and people with zero credit often have low scores, but telling me to take on more debt? Very odd. Can anyone explain this?

Yep, just read it again. "A credit limit of at least 4,000 across well-managed accounts Will help to improve your score."

Debt isn't a problem if it's manageable and well controlled. Having a bit of debt and paying it off, not missing repayments, not incurring late payment fees or defaults shows potential lenders that you're a responsible borrower!

It shows shows a track record of managing to pay regularly with no problems.

Also Experian make money by selling data to credit companies who in turn make money by selling you credit.

That makes sense, I was just surprised they told me 3.5k was a bit low! Luckily I've got no missed payments.

A credit limit is not quite the same as a debt though is it? Having access to that across credit cards for example would give you that as a limit - doesn't mean you have to constantly be using it?

Mines just gone down as I spent this year clearing any and all debts. It’s a bit deflating. I’m using a credit card for day to day spends to keep my score up.

I got turned down for a store card. When I questioned why, as (at that time) I had no debt, no mortgage, living at home, minimal bills, disposable income etc., I was told that was probably why. I was not a tried and tested/trusted debtor.

That's different 😁

I did it via high limit on credit card. I got 999 eventually! Still disappointed you don't get certificate or something...
I was offered crazy amounts in credit limits and loans

Yeah that's true I didn't read it correctly... Anyway I find the whole system a bit daft!

A credit limit isn't the same as a credit balance. It's just saying if you have lots of credit available to you, but you use it responsibly (ie. Always pay in time, pay balances down etc) then you're demonstrating that you're able to live within your means.

There's a negative marker if you're utilising above a certain % of your total available credit (can't remember exactly what %). As that's seen as risky to max out all your available credit.

If you end up in the above scenario then you genuinely can go on and request increases in credit limits to bring your % utilisation down. Which seems counter intuitive but you'll only get credit limit increases if your affordability checks pass.

Eg. You earn £50,000 per year and are utilising £900 out of £1000 of your total credit available. You're at 90% utilisation. But actually your affordability is much higher, so if you request a credit limit increase to say £3000 but keep the balance the same at £900 you'll be seen as demonstrating good money management

It’s a credit limit, you don’t actually have to have that much debt.

Yup, that’s how it works. I don’t owe a penny. When I paid off my mortgage my score actually dropped. Now I use my credit card to pay for things like holidays, and pay it off in full every month. When there’s a balance on it, my score goes up, as soon as I pay it off, my score drops again.

I am using a lot of my limits which isn't good, anyway now I'm in a new job and have a tight budget I'm confident it will go down. Hopefully! 999,wow!

Note that every company uses different credit company so your score will differ. Callcredit are pita in my experience because they kept fucking up my address

I have no idea what my credit score is, not sure I really need to know tbh.

I have a mortgage I pay every month and a credit card I use for travel and big items and pay off in full.

I am using a lot of my limits which isn't good
High utilisation is not. I got CCs which I put in a drawer and never used just to lift the limit and lower utilisation.

Miscalculated, turns out I owe 3k instead of 3.5. Yeah, I noticed I was good on Experian but needs work on Equifax.

@Partyinfrance I use Clearscore primarily if I want to check my score. I just checked Experian and Equifax. Just as an FYI - I think Equifax is a paid service.

It's not a service I would pay for personally, the advice is quite straightforward and the free services (Experian and Clearscore) are fine to get you into a good place score-wise.

Admittedly I don't think a score means a huge amount. But the pointers it gives you around how people are scored can be beneficial.

I wish these things were taught in school.

It might be based on proportion though, not everyone will see that figure. Someone with £100,000 available on credit might see a higher figure. Someone with £3000 available on credit might see a low figure. It’s just about % utilisation. You don’t get a good credit score by never using credit - you need to use it and show you’re impeccable with repayment to be trustworthy