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Original poster

How do I use my credit card to build my credit? Never had one before.

31 replies

ThatSharpCrow · 13/02/2024 22:57

So as an adult I've always had poor credit.
Made some stupid decisions in my early 20s. Got in over my head with catalogues when I was a SAHM with no income. Alot of debt, etc.

I'm now mid 30s. I had a CCJ but that's fallen off my file.

I've never had much credit. I couldn't even get a phone contract because I'm on disability benefits and don't work

My credit score in December was 550 and it's gone down to 350 since then! Absolutely no idea why.

I was advised many times to get a CC to build credit but even Vanquis wouldn't give me one.

I've been using klarna, clearpay, laybuy etc for years and have never, ever missed a payment.

80% of the time I repay early. Always on time.

I don't know if this helped but the other day I went on my credit checker and was pre approved for a 34.9% credit card.

Which I applied for and was approved, which baffles me as I've just dropped 200 points?!

I do not need this money. I have modest savings. I live a frugal life.

I just want to build my credit up so that some day I may be able to get back into work and have a good credit rating

So after being told for years to get a CC to sort my rating out, now that I have one what do I do with it?

OP posts:
JodieFostersFurHood · 14/02/2024 00:12

Use it for all your everyday spends and repay it in full every month.

EmpressaurusOfTheScathingTinsel · 14/02/2024 00:24

Or just pick one or two minor monthly bills and move them onto it, then set up a direct debit to make sure you pay your card off in full every month.

That way you never get anywhere near the monthly limit, you don’t have to think about it & the credit agencies can see you’re being responsible.

Hereyoume · 14/02/2024 01:12

First of all, your credit score is nonsense, you are the only one who ever gets to see it, and no business or bank is going to make any decision about you based on your Credit score, they do their own checks.

When people say "good credit" they really mean "easy to get a loan".

The major players here are Credit accounts, payment history and credit utilisation.

The more credit accounts you have the bigger your footprint, things like utilities, mobile, insurance, get as many bills through credit as you can, not pre-pay. But you MUST pay them on time and in full.

Credit utilisation is the ratio of available credit to credit balance, the magic number is 20%. NEVER use more that 20% of your available credit limit. This demonstrates that you don't "need" the money, so you become less of a risk to lenders. It may seem counter intuitive, but having several credit cards is better for your "score" than having just one, providing you live by the 20% rule one all of them.

Your interest rate is bordering on criminal exploitation, so be careful OP. Make sure you pay that thing off in full, if you don't that rate could bury you.

Gluteustothemaximus40 · 14/02/2024 01:24

tesco do a credit builder card that starts off at £200. Set up a direct debit to clear the amount in full every month. Use it for bills/normal items you need. Slowly your rating will build and your credit will increase. Mine is now £4600 limit and my credit score is very high after being shot to pieces for a long time.

AcridAndStanLee · 14/02/2024 02:17

As above, use and repay in the month. Credit rating is bollocks tho. Mine is up and down like a yo-yo but either good or excellent even though I owe half my yearly salary in loans and credit cards.

Monty27 · 14/02/2024 04:09

JodieFostersFurHood · 14/02/2024 00:12

Use it for all your everyday spends and repay it in full every month.

That's what I do

elkiedee · 14/02/2024 05:16

If you're on a low income I'd be wary about using a credit card for all your everyday spends unless you're budgeting very carefully, because it's quite discouraging finding you've spent all your money before it comes in - I speak from experience. Also if you have an benefit income hiccup that delays paying it off and the interest kicks in, it's a ripoff. Although overdraft interest rates (APR) are in theory even higher than credit cards, if you are overdrawn for 3 days you pay for the amount that you're overdrawn by for 3 days. Credit cards give you weeks to pay it off before paying interest, but if you don't settle in full by the payment date, you will pay for it all going back to when you spent it. So if I spent £100 last week on my credit card and £117 on Monday, and I pay part of that off but leave £100, it will be on my next statement in early March, payable in late March. If I then pay off £80 5 weeks after spending it but leave £20 outstanding after 28 March, I'll still have to pay 5 weeks interest on the £80 and and I'll be paying interest on the £20 for at least 6 weeks until I pay it off. If I don't have direct debit payments set up it will be more.

I'd say just spend a little money on your card, and try to pay it off fairly quickly, don't wait.

And I know Universal Credit and other benefit payments are paid 4 weekly so paying off your card by direct debit is even trickier as you don't have the same pay day each month, so it's important to be on top of paying it off. Also read all the small print on your statement (I recommend staying with paper statements and reading them, as it's too easy not to bother logging into online ones) to understand how your repayments are treated, as some will still collect any set up direct debits and others will subtract interim payments from any direct debit collcted.

Also keep a close eye on your balance - you can use online banking and/or a phone app to do so!

Original poster
ThatSharpCrow · 14/02/2024 08:25

Thankyou. I'm not on UC. I get paid CTC weekly and ESA fortnightly.

OP posts:
JamesPringle · 14/02/2024 08:29

I took a CC to improve my credit score. Take note of what a PP said- Your credit score will improve a lot more if you only use up to 20% of your limit. I use mine sparingly, always pay it back straight away, and my credit score improved a lot in a few months.
I really wouldn't put all everyday spends on there, in case it takes you over the 20%.

Original poster
ThatSharpCrow · 14/02/2024 08:32

Thankyou.

So stay under £100 a month and pay it back immediately. Got it x

Sorry if this is a daft question but if I bought something for £100 then paid it off immediately it would just cost me £100 right? The APR wouldn't be added on?

OP posts:
Perfect28 · 14/02/2024 08:33

Do you check your score on clear score or similar? It will tell you why it went down and how to improve

Trinity69 · 14/02/2024 08:35

When my score was lower I’d use it just for petrol and pay it off in full. Using it for everyday spends wouldn’t work for me because it’s not like spending real money and as a result my everyday spends would rocket. I’ve got no self control!

trooc · 14/02/2024 08:44

First of all ask yourself why you are trying to improve the score?

Most people to get a mortgage or loan:car credit in the future but as you have no job you are not going to get that anyway.

The other thing is paying regular monthly bills in a CC and then paying it off in full may raise your credit score but for any potential lender it's days 'this person cannot afford monthly expenses without using cc' / they look at the detail, not the number.

Original poster
ThatSharpCrow · 14/02/2024 08:46

trooc · 14/02/2024 08:44

First of all ask yourself why you are trying to improve the score?

Most people to get a mortgage or loan:car credit in the future but as you have no job you are not going to get that anyway.

The other thing is paying regular monthly bills in a CC and then paying it off in full may raise your credit score but for any potential lender it's days 'this person cannot afford monthly expenses without using cc' / they look at the detail, not the number.

I literally said in my OP it's so that when I get a job in the future I can already have a decent rating (to get a car etc)

OP posts:
trooc · 14/02/2024 08:48

@ThatSharpCrow

Sorry Blush

I just read the ESA and assumed you had long term health problems!

AcridAndStanLee · 14/02/2024 19:33

ThatSharpCrow · 14/02/2024 08:32

Thankyou.

So stay under £100 a month and pay it back immediately. Got it x

Sorry if this is a daft question but if I bought something for £100 then paid it off immediately it would just cost me £100 right? The APR wouldn't be added on?

Exactly. For example, one of my credit card statement gets generated on 26th of each month and I have to pay it by 4th. If I pay it and clear it by the 4th then I pay only what I spent. If I pay some of it, interest is generated on the remaining.

AcridAndStanLee · 14/02/2024 19:34

But do be really careful. I got a credit card and just put petrol on initially then just added this little essential and that little essential and now I've loadsa debt.

SarahLHs · 14/02/2024 20:02

I use mine just for petrol every month and then pay it off on pay day

Original poster
ThatSharpCrow · 14/02/2024 20:04

trooc · 14/02/2024 08:48

@ThatSharpCrow

Sorry Blush

I just read the ESA and assumed you had long term health problems!

I do but I can hope that one day I'll be able to get back to employment, I don't want to live this way forever.

OP posts:
ConfessionsOfAChocoholic · 14/02/2024 20:10

You need to wait for the statement to be generated before you pay it off in full. The statement will tell you when payment has to be made by, provided you do this then your credit history should improve.

JodieFostersFurHood · 14/02/2024 20:12

As regards paying it off you check what the balance due is on the statement and you pay that. There is no need to pay off the total amount.

I don't see the difference between putting your daily spends on your debit card or your credit card? They are the same daily spends.

@Hereyoume I don't understand what you mean by this.

"First of all, your credit score is nonsense, you are the only one who ever gets to see it, and no business or bank is going to make any decision about you based on your Credit score, they do their own checks."

They do see it and they do decide. I have just looked at mine a few days ago and I can see all who have looked at it. I have just been refused a card because of what was on mine - no mortgage (it's paid off ) and I have too many cards ( I have 4 one of which is a credit card) . I have one credit agreement currently for 49 a month for 24 months.

If you want a free look at your credit report go here
https://www.transunion.co.uk/

You can take a free trial with Experian as well.

trooc · 14/02/2024 20:31

@JodieFostersFurHood

They do see it and they do decide. I have just looked at mine a few days ago and I can see all who have looked at it. I have just been refused a card because of what was on mine - no mortgage (it's paid off ) and I have too many cards ( I have 4 one of which is a credit card) . I have one credit agreement currently for 49 a month for 24 months.

They don't use the number. They use the information available to them about your debt and credit availability. Lenders don't agree about the number.

JodieFostersFurHood · 14/02/2024 21:01

@trooc we are talking about the same thing then yes !The overall number is useless ( in my case) as mine is excellent. The other bits are looked at. The whole credit report. The following day though I got one with a ludicrous amount on it from a different source. I'm looking for benefits not the credit.

MadeForThis · 14/02/2024 21:37

What is the credit limit on the card?

Sum to stay well under that.

Even if it just means putting £20/30 on the card each month and paying it off immediately.

You won't pay any interest but you will build your credit score. Don't apply for any more credit for a good few months.

baileybrosbuildingandloan · 15/02/2024 11:23

ThatSharpCrow · 14/02/2024 08:32

Thankyou.

So stay under £100 a month and pay it back immediately. Got it x

Sorry if this is a daft question but if I bought something for £100 then paid it off immediately it would just cost me £100 right? The APR wouldn't be added on?

Spot on. I have built my credit over the last 5 years this way.

I am shocked that people say no one takes notice of it tho?!