Can someone explain credit scores to me?

[MaisWeee]

I've an overdraft, 2 credit cards and Next has given me a whopping £3750 credit.
I'm wondering whether that credit affects my credit score (used once about 2 years ago and not since then).
Like, if I reduced that limit to £250, would I then be more likely to get £3500 credit on my credit cards instead?
Just wondering whether it's best to leave it as is or reduce it?

Sorry if this is a stupid question.

I don't 'think' it makes a huge amount of different a but I've also read it's best not to have used a high % of your available credit, e.g. £3500 of the £3750 or £180 of the £200 (if you reduced it to too).

But then I also read that you shouldn't have a huge amount of available credit as lenders have to take into account the possibility of it all turning into potential debt overnight if you go on a spending spree!!

Sorry not very helpful, but I'm having a similar dilemma with a credit card that has a high limit, I've just paid it off in full but don't know whether it's best for my credit score to keep it open, close it or reduce the limit!

Hopefully someone more knowledgable might be able to answer!

I'm also in the same quandary. I have a card that's paid off and another which is half way to being paid off, I'm just not sure if I should close the nil card to improve my credit score or not.

I find it amazing that you can be refused a loan on the basis of your credit score, based on the fact that you have never been in debt to anyone at all!!

Having lots of available but unused credit is good for your credit score. So if you’re not going to spend the limit, great. If you are, not so great. Are you in your overdraft and have money on the credit cards?

@Mischance it is odd but if there’s no record of your ability to borrow and pay back there’s no data for them to base a decision on.

I heard this on MoneyBox - apparently if you have never had a credit or store card, you cannot be allocated a score, because they have no record of whether you are a good payer.

When I heard it I thought that was a bit nuts, as, if you have never needed credit, then it might be assumed that you were either very rich or a good money manager!

Isn't credit scoring more about proving that you can manage credit reponsibly - so if you're not defaulting on anything, making payments regularly and not late, not applying for more credit left right and centre.. Also things like being on the electoral role, living in the same place for several years and not moving, having a mortgage.

We have a massive limit on our credit card because we are good customers and always manage the payments well but have never been refused credit elsewhere.

Hmm. I don't use the overdraft and it's not high anyway £500. I use both credit cards and usually pay the full balance off both. However, I needed to make an expensive purchase before Christmas, so will be paying £100 a month off that debt (it's on one of the credit cards).

Just checked my credit score yesterday with MSE. It says my credit rating is good 923 out of 999. However, I only qualify for 2 out of about 15 - 0% balance transfer cards. And it shows my rating for new credit cards as weak and my rating for receiving a loan as poor!

I can't make head nor tail of it really.

If you have never had credit it’s harder to get credit as they have nothing to set a standard by
My DH score on Experian is 999 which is pretty much the highest you can get
We have 3 credit cards with a complete lending amount of around 45k sometimes we can go up to around 10k on the cards but it’s alway paid off quickly
At present 2 of the card have 0 on them one has a holiday that we are going on in Feb for 5k it’s interest free for 18 month but we will pay off by May or June
An overdraft of 2500 and 1500 but both of them are rarely used and one club book that I love getting odes bits from
3 mobile phones on contract

When he applied for his new car lease it just went through without any further checks apart from a copy of his ID this was for a 40k car

We have never defaulted on anything though and always pay everything back on time

But 20 years ago though my DH was bankrupt😂
And couldn’t get a credit card if his life depended on it

1. There is no such thing as a credit score. That’s just a way for credit reference agencies to quantify how credit worthy they believe you to be because a number is easier than breaking down the detail and saying your good or bad. AND it’s a great marketing tool because they can get you to sign up to see your credit score:

-Are you on electoral roll? Very important -Have you lived at your current addresses for more than 4 years. If you haven’t it’s not a deal breaker as long as you are not too footloose -the number of credit accounts you have. None is bad, you need credit to get more credit. A few is ok as long as you service them well. 5+ with a history of credit being paid is great. -how much of your credit are you using? If you are using 100% that could be a flag for a lender because you want more -what kind of credit do you have? Payday loans are a no no for banks. It will work against you. Store cards are not a problem but not the best kind of credit. Loans and credit cards from big banks show that you are already seen as credit worthy by the big players. -settles accounts are great. The more of these you have, the more favourable you will seem to a creditor because it shows a history of you taking credit, paying on time and moving on. -how much credit do you use in relation to your income? 50k in outstanding credit is no problem if you household declared on new credit applications is say £200k. But £5000 credit applications could be refused by a bank to someone on a £50k single income who has high childcare costs.

There are many more things a lender will look at but ultimately they DO NOT use credit scores. They look at all the information on your file and look at it in relation to your income and outgoings. They WANT to give credit, that’s the business they are in, but they want to give it to people, first of all who don’t need it. Banks want to lend it to people who are using credit for things they could wait to buy or buy with their own money but choose not to. If anything on your credit file indicates that you NEED it, then expect to be declined or be offered a punitive interest rate.