Credit Rating: How it works and How to improve it discussion area

Richartz

Hi,
I run an ICT business and now I need a fleet vehicle, so I was going to apply for a Business Lease Hire Purchase on a monthly payment plan, I haven’t applied anywhere yet as I don’t want any searches spoiling my chances, my only issue really is that I have missed a couple of payments on a personal loan at the end of the year (2008), which have been resolved now without a CCJ or anything harsh being applied, aside from that my credit history is very good. Is there any advice you can give me before I apply? I was planning on applying for this in April 2009
Many Thanks,
Brett Kaby

penlid

Hope someone can advise?

We have good finances (only debt is our mortgage and now have some savings) apart from one odd credit card that has had some missed and late payments over the last year or so. That card is now paid off and the balance is nil, but how can we best repair any damage it has done to our credit rating? We are looking to move in the next year and so don't want anything to harm our chances of getting a new mortgage.

Should we (1) close the credit card account now it is paid off, (2) keep it open without spending on it, or (3) keep it open and spend on it, paying off the full amount each month. We do not need the card to spend, and so our sole aim is to do whatever is needed to best and most quickly improve any damage done to our credit file.

Thanks very much

hur575

penlid wrote: »

Hope someone can advise?

We have good finances (only debt is our mortgage and now have some savings) apart from one odd credit card that has had some missed and late payments over the last year or so. That card is now paid off and the balance is nil, but how can we best repair any damage it has done to our credit rating? We are looking to move in the next year and so don't want anything to harm our chances of getting a new mortgage.

Should we (1) close the credit card account now it is paid off, (2) keep it open without spending on it, or (3) keep it open and spend on it, paying off the full amount each month. We do not need the card to spend, and so our sole aim is to do whatever is needed to best and most quickly improve any damage done to our credit file.

Thanks very much

I think option 3 keep it open and spend on it, paying off the full amount each month, it is better to have more green dots than nothing in the file. Try not to miss any payment set a direct debit for minumum in case you forget to pay in full.

davyboy0

Hi, i just want to say something that happened to me, i had a good credit rating with experian it was 921 out of a 1000 and 980 with equifax, so pretty good i think no payments missed no c/c judgements so i thought i would apply for a Tesco 0% c/c to transfer a balance as advised by THIS SITE and many other people, well all done on line and after 2 mins got a declined answer, so i thought i would check my experian score because i was obviously checked and to my horror my score was down to 841 and in the fair bracket. i e-mailed experian to check (i am a member of there monthly site to moniter my accounts) and they replied with an answer of, applying for credit will severly effect your rating (NOT TOLD THIS ARE WE BY THIS OR ANY OTHER SITE) so if you apply for another one because we are told one might not but another company might accept you, your rating will be completely shot, so DONT DO IT UNLESS YOUR PREPARED TO RECK YOUR RATING) , here is a copy of the letter they replied with , you make your own mind up .hope this helps.Make sure you read the last sentence.


Thank you for your email, which we received on 26 January 2009.

Your Experian Credit Score is meant as a guideline only. We calculate your score based only on information held on your credit report. When lenders work out their credit scores, they will also use information that you provide when you apply and may also use information about anyone you that are financially linked to.

Your Experian Credit Score is unlikely to be the same as the score that a lender calculates. Scoring can vary from company to company and they may use different scoring for different products.

You do not have one single credit score because different companies use different credit scoring systems. You might be refused by one company but accepted by another, based on exactly the same information. As well as looking at your past credit record and how much money you have spare each month, lenders often have in mind a type of customer that they are looking for. So having a good credit record can never guarantee that all your credit applications will be successful.

I would advise that searches have a significant impact on your credit score. We advise that you apply no more than 3 times in a 6 month period.

Moggles_2

Originally Posted by davyboy0
We advise that you apply no more than 3 times in a 6 month period.

Meanwhile, for tips to improve your chances of credit card acceptance next time, have a look at the *Credit Rating: how it works and how to improve it guide* especially Martin's *Manage and Improve your credit score* article

http://www.moneysavingexpert.com/banking/credit-rating-credit-score#improve

Martin's approach takes a little more effort than watching these credit scores but, IME, is more likely to get results.

ScRiMpNsAvE_2

Hi Davyboy0

I'm certainly no expert but please see the my take on a few of the points you made.

davyboy0 wrote: »

i had a good credit rating with experian it was 921 out of a 1000 and 980 with equifax

I wouldn't get too bogged down with your credit 'score' or 'rating' - this is Experian or Equifax's calculation based on your credit file. Lenders will 'score' you based on a different calculation which suits their requirements. This will no doubt take into account the number of seperate credit accounts you have, your total available credit and more signficantly the proportion of that you owe; how long you've lived at your current address etc etc...

Each lender will have their own requirements, so just because Tesco turned you down doesn't mean others will. I obviously don't know about your current borrowing situation but you may well have been turned down because you're too low a risk and they don't think they'll make any money off you.

davyboy0 wrote: »

NOT TOLD THIS ARE WE BY THIS OR ANY OTHER SITE

davyboy0 wrote: »

I would advise that searches have a significant impact on your credit score. We advise that you apply no more than 3 times in a 6 month period.

It is well documented on this site that (a) credit searches will be placed on your credit file, that (b) these searches will have an impact on any further applications within the next 6 months, and (c) to spread applications out. In the past I personally have been turned down on one application, only to apply for another card and get accepted right away. You just need to be sensible about when to stop applying. As long as you haven't made multiple credit applications (2/3+ by my reckoning) then you should be ok.

Indeed make your own mind up and do your own research, but don't be too hasty or disappointed in a drop in your credit 'score'.

Read this article in full for more info on all the above:

http://www.moneysavingexpert.com/banking/credit-rating-credit-score

Hope this is helpful to you and anyone else, other MSEs please feel free to correct me where appropriate! I'm a newbie myself! :money:

SnS

penlid

Hur575, thanks for your response. We will certainly not be missing payments ever again, a long story as to why they weren't paid properly up to now but it won't happen again!

Gregm

To those that who refer to the experian credit scoring I can confirm what others have said, don't take it as accurate.

I had a score in the 300's about 2 years ago, it is now sitting on 900. I have cleared all the debts, leaving just my mortgage and a credit card. The score of 900 sounds good but it's not, I have ccj's and two defaults listed on my report, even though they are paid off now in full and marked as satisfied/settled they are still there and my bank has told me that they will not entertain anyone for a credit card if there are defaults on their report.

Now I could be wrong and she may have meant outstanding defaults but I still find hard to get credit even though for past two years there has not been a single missed payment.

This tells me that the experian score means little, I do check it now and again but just as a guide.

MagicWander

Hi,

I have been trying to help my OH pay off his debt and improve his credit score! I have successfully reclaimed charges, which have paid off two cards - thanks to this site, but now need to work on improving his credit score! (I've kind of taken over his financial life!)

The question is this: I've read the article that says he should spend on a credit card and pay off in full every month to improve his credit score, but was just wondering whether it would be better to apply for a new card and start from scratch or to just use his existing card (which has LOTS of late payments but no defaults and is now clear!) or whether it would make no difference (in which case we'd use the one he already has to save making another application for credit)???

Any thoughts would be appreciated! Thanks!

wkitching

cleariang credit cards to get debt to credit ratio back on track can affect your credit score by how much ? I have 2k on credit cards (a grand on each) nearly maxed out. Which will be cleared next month. Will this improve my score by 50-100 points or more?...

Kind regards, Wayne