First credit card - How to improve credit rating?

Hi guys,

Sorry if this is a painfully obvious question.

I've just been approved by Capital One for my first credit card. I don't have any debt or anything, i just figured it would be a good idea to start building up my credit score for the future.

As mentioned, this is my first credit card so i'm very new to all of this. How exactly do i start building my credit score? Can i just pay for something on my credit card then log in to my online banking account and pay off the balance straight away? Or do i have to leave it for a bit?
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  • Tixy
    Tixy Posts: 31,455 Forumite
    You need to wait and pay after the statement is generated.

    Ideally you would use it to buy a small number of puchases each month, wait for the statement and then pay in full (ensuring your payment will reach the account before the due date).
    A smile enriches those who receive without making poorer those who give
    or "It costs nowt to be nice"
  • Thanks for the reply.

    So just to clarify, i could spend say, £50 on something. Then the lender would send me a statement (assuming monthly?), then at that point i pay it off in full? Won't i get affected by the high interest rates if i do this?
  • Tixy
    Tixy Posts: 31,455 Forumite
    If you clear each statement in full then you do not get charged interest. So your terms will say something like up to 53 days interest free credit - this is what they mean.

    The statements come roughly monthly and you then usually have at least 2weeks from the statement date to the due date to pay in full (your statement will show the due date).

    If you don't wait for the statement and pay straight away then it can be reported to your credit reports as though you are not actually using any credit (and so doesn't help you build up a positive credit history).
    A smile enriches those who receive without making poorer those who give
    or "It costs nowt to be nice"
  • TheRed
    TheRed Posts: 52
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    Sorry for hijacking the thread slightly-- didn't want to clog the forum with similar threads. Hope you don't mind Toosimple97!

    I'm in the same position as Toosimple. Just got my first card for the same purpose. Already had my first statement, etc etc.

    My question is: is it better to max the card each month, only put a little debt on it each month, or does it have no impact either way when trying to build a good credit history?
  • Cyberman60
    Cyberman60 Posts: 2,472
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    Just to clarify as a friend was under a misapprehension here, if cash is withdrawn on a credit card then interest charges start accruing from that instant. The interest free period up to statement payment due date is only applicable to purchases.

    As far as building a good credit record is concerned, having debts and paying them off on time will enhance it just as failing to pay on time may well damage it.
  • bigadaj
    bigadaj Posts: 11,531
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    TheRed wrote: »
    Sorry for hijacking the thread slightly-- didn't want to clog the forum with similar threads. Hope you don't mind Toosimple97!

    I'm in the same position as Toosimple. Just got my first card for the same purpose. Already had my first statement, etc etc.

    My question is: is it better to max the card each month, only put a little debt on it each month, or does it have no impact either way when trying to build a good credit history?

    Just use it for your normal purchases and either pay off in full after your statement date or set up a direct debt for full payment and make sure you have funds in your account. Make sure you don't go over your credit limit as there will be a charge and a black mark.
  • Anthorn
    Anthorn Posts: 4,362
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    I already answered this question in a different thread. Here's a link to that post:
    http://forums.moneysavingexpert.com/showpost.php?p=65723242&postcount=2

    As I said in that post it's not possible to answer the question because it all depends on who is reading your credit history.

    I suppose the compromise in the pay off the full balance versus keep a balance debate is to alternate each month.

    But if you are willing to pay interest and you can comfortably afford to pay it and you're not going to overspend by keeping a balance you can't afford to pay back then why not keep a balance?

    Lastly there is no advantage in the eyes of a lender in paying off the full balance every month. In fact it could be a disadvantage.
  • thebritishbloke
    thebritishbloke Posts: 1,472 Forumite
    Anthorn wrote: »
    I already answered this question in a different thread. Here's a link to that post:
    http://forums.moneysavingexpert.com/showpost.php?p=65723242&postcount=2

    As I said in that post it's not possible to answer the question because it all depends on who is reading your credit history.

    I suppose the compromise in the pay off the full balance versus keep a balance debate is to alternate each month.

    But if you are willing to pay interest and you can comfortably afford to pay it and you're not going to overspend by keeping a balance you can't afford to pay back then why not keep a balance?

    Lastly there is no advantage in the eyes of a lender in paying off the full balance every month. In fact it could be a disadvantage.

    Please don't listen to Anthorn's advice. He keeps consistently advising people that they should not pay off their balance in full each month, because for some reason he has it in his head that paying interest is a good thing.

    There is NO DISADVANTAGE TO PAYING IN FULL. All this does, is save you money and open up more opportunities to you. If a lender doesn't want you because you won't make them a profit on interest, they're not the kind of company you want to do business with.
    Credit 'Score' - Don't buy the credit 'score' that Experian, Equifax and Noddle want to sell you. It's an arbitrary number that means nothing when it comes to applying for credit.

    ALWAYS HAVE A DIRECT DEBIT SET UP FOR THE MINIMUM PAYMENT ON YOUR CREDIT CARDS, REGARDLESS OF WHETHER YOU PLAN TO LOGIN AND PAY EACH MONTH.
  • Anthorn
    Anthorn Posts: 4,362
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    Please don't listen to Anthorn's advice. He keeps consistently advising people that they should not pay off their balance in full each month, because for some reason he has it in his head that paying interest is a good thing.

    There is NO DISADVANTAGE TO PAYING IN FULL. All this does, is save you money and open up more opportunities to you. If a lender doesn't want you because you won't make them a profit on interest, they're not the kind of company you want to do business with.

    Which lenders don't want to make a profit on interest? That's a ridiculous statement isn't it.

    Let's consider that the credit history at the CRAs is merely an introduction. What then follows is our ongoing relationship with the lender. Now if we want something more from that lender such as limit increases then sometimes we have the play the game according to the lender's rules. For example if the lender only gives limit increases to customers who keep a balance and you realise that then you will have to keep a balance to get your limit increases. When you do that it reflects in your credit history.

    Lenders differ. While some lenders hand out limit increases arbitrarily based on time, others don't.

    In the example of the lenders who want their customers to keep a balance and pay them interest, customers who pay off their full balance every month are dead accounts, free-loaders. When the time comes to reduce the number of accounts the free-loaders will be the first to go.

    It's your ongoing relationship with the lender that really matters and it's in interacting with your lender that you find out what the lenders' prime motive is in providing you with credit.
  • p00hsticks
    p00hsticks Posts: 12,672
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    Anthorn wrote: »
    Which lenders don't want to make a profit on interest? That's a ridiculous statement isn't it.


    Anthorn wrote: »
    In the example of the lenders who want their customers to keep a balance and pay them interest, customers who pay off their full balance every month are dead accounts, free-loaders. When the time comes to reduce the number of accounts the free-loaders will be the first to go.



    Credit card companies make plenty of profit from the charges they make to retailers, even if the card is paid off in full each month.
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