Minimum Repayments affect Credit Rating?

jaytee158

If i make the minimum repayment on my card does my credit rating get affected?

NickX

jaytee158 wrote: »

If i make the minimum repayment on my card does my credit rating get affected?

As long as you make all the required payments on time, there should be no adverse effect on your Credit Rating, more likely that it will improve because you are proving that you are managing the account well.

YorkshireBoy

A different view...

If you're only making minimum payments on an interest bearing credit card debt, it could lower your rating with that provider and trigger an APR increase...witness the many reports on here of MBNA doing just that.

With lenders about to start submitting more information* about how you manage your account to the CRA's, your credit rating could be affected with other providers as well.


* http://experian.metafaq.com/resources/experian/Downloads/Credit_report_explained (see page 16)

exel1966

NickX wrote: »

As long as you make all the required payments on time, there should be no adverse effect on your Credit Rating, more likely that it will improve because you are proving that you are managing the account well.

That would depend on how whoever looks at your credit report reads it.

It doesn't have a direct effect, but obviously the less you pay, the more your outstanding debt is which does have an effect on your overall rating and suitability for further credit.
Amounts paid each month never used to be visible to other creditors until recently, but some of them are now visible and what is summised from that by other creditors is as yet an unknown quantity. It could be read by others as the cardholder not having enough funds to pay more than the minimum requirement and possibly struggling, it could be totally ignored, but then why would it now be included If other creditors didn't want to know ?
I don't believe paying the minimum does currently have too much negative effect, but in the very near future I think It will matter greatly.

NickX

Hmmm ok we'll see then

Generally speaking I only ever pay the minimum on multiple accounts (all at 0% interest), and either pay off in full or transfer elsewhere before the end of the promotional period. I believe that this has enhanced my Credit Rating over a period approaching 10 years and I have never had a rejection except once when I re-applied for a card that I already had.

Now I am stoozing rather than facing financial hardship but could this new information make a stoozer look like a customer struggling to make Minimum Payments only ??

YorkshireBoy

NickX wrote: »

Now I am stoozing rather than facing financial hardship but could this new information make a stoozer look like a customer struggling to make Minimum Payments only ??

I wouldn't think so Nick, because there will be a 'Y' in the "Promotional Rate Indicator" column (see the link in my earlier post).

jaytee158

I only intend on doing this once as I have to put a big purchase on the card and won't be able to repay it until December so it's not like it will be a regular occurrence on my account

NickX

jaytee158 wrote: »

I only intend on doing this once as I have to put a big purchase on the card and won't be able to repay it until December so it's not like it will be a regular occurrence on my account

My opinion is that it shouldn't cause you a problem, but what interest rate are you going to be paying ? If you could get your purchase on a 0% card then that could work nicely for you.

loveandlight

posted by exel1966
It doesn't have a direct effect, but obviously the less you pay, the more your outstanding debt is which does have an effect on your overall rating and suitability for further credit.
Amounts paid each month never used to be visible to other creditors until recently, but some of them are now visible and what is summised from that by other creditors is as yet an unknown quantity. It could be read by others as the cardholder not having enough funds to pay more than the minimum requirement and possibly struggling, it could be totally ignored, but then why would it now be included If other creditors didn't want to know ?
I don't believe paying the minimum does currently have too much negative effect, but in the very near future I think It will matter greatly.

You are absolutely spot on here.

Paying the minimum amount is definitely viewed negatively nowadays by lenders. Amex have written to me today slashing my credit limit despite a perfect payment history. They say that people who can afford to pay more usually do (I pay the minimum because my balance is a low life of balance at 3.9% so I pay more money off my other higher interest cards).

They basically said they have done it to protect me from myself!! Umm I have a 30 year blemish free credit file, the highest rating you can get internally with a bank (my bank have told me this) and Experian and Equifax both tell me I have one of the best credit files they have seen. (Their words not mine).

I'm not bragging guys I just wanted to let you know that very often you will get treated badly by the banks because their own policies have changed and nowadays minimum repayments are being viewed in a negative light by most card companies.