Pay it all of or leave some balance -what's best for my credit score?

timmay2606 · 17 June 2017 at 3:00PM

Hi, I've recently come out of an IVA and want to start rebuilding my credit rating. I signed up for a credit card and have been accepted, and my SO and I have agreed that we'll use it to have a positive impact on our credit (not for lavish spending beyond our means - learnt that lesson!)

To increase my score as quickly and effectively as possible, am I best served by maintaining a balance on the card but ensuring payments, or clearing the balance completely each month?

If it's best to keep a balance, what percentage of the credit limit is best to maintain?

Cheers in advance...

:beer:

P.S. apologies for spelling - on mobile...

[Deleted User] · 17 June 2017 at 3:07PM

Clear in full. Anything else will look as if you can't afford your regular spend.

Also ignore your credit scores entirely. It doesn't reflect anything about how lenders will view you. Just manage your credit responsibly

[Deleted User] · 17 June 2017 at 3:29PM

As above. Scores are relatively meaningless, but can be amusing to monitor!

I've not paid any interest and my 'score' and (more importantly) credit rating with lenders is constantly improving. Ultimately what lenders think counts. I had a score of something silly like 54 with Experian and opened 2 credit cards in the same month after seeing that!

If you want to give your credit file (or 'score'!) a big boost, and if you trust your partner, or already a link with them (mortgage etc)..... then add yourself to any bank account they have which is run well, and over 6 years old. You'll instantly benefit from the positive history.

If you DON'T already have a link - think very carefully before creating one, as it'll drag your other halves score down (assuming their file is good). Likewise, if they have more recent issues than you have, don't link yourselves by combining the account, as you'll end up dragging yourself down.

BobQ · 17 June 2017 at 6:00PM

timmay2606 wrote: »

Hi, I've recently come out of an IVA and want to start rebuilding my credit rating. I signed up for a credit card and have been accepted, and my SO and I have agreed that we'll use it to have a positive impact on our credit (not for lavish spending beyond our means - learnt that lesson!)

To increase my score as quickly and effectively as possible, am I best served by maintaining a balance on the card but ensuring payments, or clearing the balance completely each month?

If it's best to keep a balance, what percentage of the credit limit is best to maintain?

Cheers in advance...

:beer:

P.S. apologies for spelling - on mobile...

If you want to live within your means why are you even asking the question
?

timmay2606 · 17 June 2017 at 6:43PM

So many reasons. For example, I'd like to be able to shop around for a fresh mortgage while rates are low, but that's not going to happen with rubbish credit.

I'd also like to get gas central heating in. This will cost around 5k to replace the electric system, but with a decent rate I can offset the payments against the savings, and be no worse off, but in 5 years time I'll be quids in.

Finally, and most appealing, is the fact that for the past 5 years I've been driving around in bangers, which, given the maintenance required, costly MOT failures, poor fuel economy etc, I've calculated that it'd be just as cost effective to lease a car instead.

Just because I've been living within my means, it doesn't mean that with the right flexibility I can't make my money go further.

Grzegorz_Kowalski · 18 June 2017 at 4:32AM

I think the problem is quite similar to the dilemma: If you quit smoking but still have a one vap per day, did you really quit?

System · 18 June 2017 at 5:58AM

I understand the dilemma especially if you had a 0% card, not that that's what you're saying

I'm not convinced replacing heating system or cars worthwhile, in my last place storage heaters never bothered me and if you lease a car you're paying for depreciation - if you're doing a lot of miles maybe it makes more sense, but if a banger is too expensive to repair just scrap it, surely cheaper than depreciation?!?
Or maybe buy a 3 year old car - the worst of the depreciation gone

System · 18 June 2017 at 6:10AM

If you put the cost of a car lease or new heating system into a stocks and shares ISA with aggressive allocation you're quite likely to do better, just don't try to time the market and don't sell in a crash, have faith that it always bounces back. Index.

takman · 18 June 2017 at 9:28PM

You definitely need to pay it off in full every month to build up a good credit history. Also make sure your no getting near the limit each month either just in case.

timmay2606 wrote: »

Finally, and most appealing, is the fact that for the past 5 years I've been driving around in bangers, which, given the maintenance required, costly MOT failures, poor fuel economy etc, I've calculated that it'd be just as cost effective to lease a car instead.

If the costs of repairs on a second hand car is more than the cost of depreciation on a new car then you are buying the wrong cars!.

Nebulous2 · 19 June 2017 at 7:05AM

takman wrote: »

If the costs of repairs on a second hand car is more than the cost of depreciation on a new car then you are buying the wrong cars!.

Some of my colleagues are paying £250 a month on a lease through the company. I paid £600 for my car. Keeping it 3 months and scrapping it would have seen me in profit.

A mid-budget car will lose £3k+ a year. It should be easy to run a car for less than that.

forgotmyname · 21 June 2017 at 4:10AM

I spent more than 50% of my cards limit one month and then paid in full at the end of the month and my "SCORE" dropped.

I would imagine a lender would rate me better than that useless score because my CC provider upped my limit very soon after.

Pay it all of or leave some balance -what's best for my credit score?

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