Best way to rebuild credit score

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Electrum
Electrum Posts: 218 Forumite
in Credit file & ratings
Is the Luma card good for rebuilding credit? If I pay it off every month ontime?
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  • Anthorn
    Anthorn Posts: 4,362 Forumite
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    Electrum wrote: »
    Is the Luma card good for rebuilding credit? If I pay it off every month ontime?

    You mean rebuilding your credit history: Any credit account will do that provided you stick with your obligations. It doesn't have to be a credit card. Whether you pay off the full balance every month or not is meaningless for your credit history provided you avoid the minimum payment marker by paying more than the minimum payment on time. Not meaningless though in avoiding relatively high interest.

    "marker" is the new MSE word of the moment lol
  • Electrum
    Electrum Posts: 218 Forumite
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    Is it true that just paying the minimum is better than paying the full balance?

    Creditors want foolish people who dont just pay the enitre thing off, never paying any interest?
  • Richey_
    Richey_ Posts: 334 Forumite
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    I pay my credit cards off every month and over time have collectively over 30k in limits, with my highest being 11k. Why pay them interest over a myth, just keep spending between your means, pay it off every month and over time you will make yourself more finically attractive.
  • Anthorn
    Anthorn Posts: 4,362 Forumite
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    edited 3 December 2016 at 1:19PM
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    Electrum wrote: »
    Is it true that just paying the minimum is better than paying the full balance?

    Creditors want foolish people who dont just pay the enitre thing off, never paying any interest?

    Related to what particular lenders are looking for in customer attributes. If a lender is only looking for customers who only pay the minimum payment making the lender pots of cash from interest then you don't have a cat-in-hell's chance of getting their card if you pay off the whole balance every month.
    Credit card companies may reject you for always repaying cards in full.

    You might feel like a dream punter, but for credit card companies you're a nightmare. If they spot this trend, you could be rejected. The most profitable customers are those perpetually in debt, never defaulting, but always meeting the minimum repayment.
    http://www.moneysavingexpert.com/loans/credit-rating-credit-score

    On the other hand if a lender is looking for short-term borrowers you don't have a cat-in-hell's chance of getting their card if you only pay the minimum every month.

    The type of card you get depends on the type of borrower you are. Go for the wrong card and rejection will be the result.

    You're playing a game and the lenders make the rules but they don't tell us what those rules are. But we can make educated guesses.
  • Nebulous2
    Nebulous2 Posts: 5,116 Forumite
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    Electrum wrote: »
    Is it true that just paying the minimum is better than paying the full balance?

    Creditors want foolish people who dont just pay the enitre thing off, never paying any interest?

    No it isn't true.
  • Superscrooge
    Superscrooge Posts: 1,171 Forumite
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    Electrum wrote: »
    Is it true that just paying the minimum is better than paying the full balance?

    Creditors want foolish people who dont just pay the enitre thing off, never paying any interest?

    Paying unnecessary interest at the standard rates that credit cards charge, when you can afford to pay off the balance in full, is daft!

    Best advice is to pay the balance IN FULL (as Martin always says) each month, unless you have a 0% deal when you just make minimum payments to get the most advantage out of the 0% deal.
  • Stigy
    Stigy Posts: 1,581 Forumite
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    Electrum wrote: »
    Is it true that just paying the minimum is better than paying the full balance?

    Creditors want foolish people who dont just pay the enitre thing off, never paying any interest?
    No. I pay the full balance each month and it makes no difference. What you might find is that you won't be offered an increase in your credit limit if you only spend 10% of your available limit each month as it appears you don't need it. Of course you could spend 90% and the creditor think you can't handle an increase I guess? You cam't usually request an increase in credit either. However it does work in your favour the more available credit you have, as long as your use is relatively low/mediocre. I had a Vanquis card with an initial 200GBP limit, over time this was increased to 1000GBP. I then got a Capital One card with a base limit of 2k. This is more than enough as far as I'm concerned. I use both regularly but pay them off each month in full, using them for things such as fuel usually.
  • Anthorn
    Anthorn Posts: 4,362 Forumite
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    Superscrooge wrote: »
    Best advice is to pay the balance IN FULL (as Martin always says) each month,

    Martin doesn't always say that at all. This article was written by Martin and Amy and updated in November 2016:
    Credit card companies may reject you for always repaying cards in full.
    You might feel like a dream punter, but for credit card companies you're a nightmare. If they spot this trend, you could be rejected. The most profitable customers are those perpetually in debt, never defaulting, but always meeting the minimum repayment.
    http://www.moneysavingexpert.com/loans/credit-rating-credit-score

    Really! Justifying a fallacy by falsely claiming that someone in a position of power "always says it" is not the way to go!

    What martin says is this:
    This is a card with a hideous rate, say 35% APR, which accepts people with a poor credit history. Yet provided you repay the card IN FULL each month, preferably by direct debit, and never withdraw cash, then you won't be charged interest, so it's no problem (don't do this if you're planning to do either of those).
    http://www.moneysavingexpert.com/loans/credit-rating-credit-score

    The advice to pay off the full balance every month is related to high interest cards.
  • rifat490
    rifat490 Posts: 4 Newbie
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    Do bankers want absurd characters who don't correctly pay the complete information off, never repaying any credit?
  • Dobbibill
    Dobbibill Posts: 4,135 Ambassador
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    Use it for day to day purchases like fuel, groceries and such like.

    Never exceed the credit limit. (to begin with aim for 30-40% of your limit as the max each month, by the time the due date arrives spending could be between 65-80% with it being approx 3 weeks into the following month so still keeping you away from the limit)

    Pay off IN FULL on time, each and every month. (preferably with a DD so even if life gets in the way, it's never missed)

    REPEAT!
    I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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