First Time Credit Card Applicant

ecdub

Hiya,

Having read the Credit card section, I am slightly confused re: the credit rating etc. Apologies if this is covered on the main website I just didnt understand it.

I read that credit card companies do not like customers who always repay their balance, and therefore do not pay any interest. I understand this, but what I dont understand is what I do about this. And while a 'credit score' is not kept, credit history's are, so I was looking at building my reputation (i know scores arent kept) but a comment was made that your history is an influence. At the moment, I will be able to pay off balances, so what do people recommend.

Hope that post makes sense! Thank you

benf90

"I read that credit card companies do not like customers who always repay their balance, and therefore do not pay any interest."

It's not quite like that. The 'ideal' customer would be someone that has a high balance, always pays the minimum amount and who never defaults on any payments.

But... credit card companies will also 'like' customers that pay in full every month, as long as they're using the card. It's usually only the customers that hardly ever use the card, and when they do it's small amounts paid off in full, that aren't profitable for them.

Some people will presume that the only reason they've been declined a card or had one withdrawn is that they pay in full every month.

However, there are usually other factors too. As credit card companies will never disclose how they profile / credit score customers it's not possible to say it's the sole reason.

I saw some figures, from a few years ago, that approx two thirds (somewhere around that figure) of credit cards in the UK were cleared in full every month.

If they didn't like full payers that figure would certainly be a lot lower.

Credit card companies make money from full payers too, as long as they use the card frequently.

You should always pay off the full balance if you're able to. The only exception is if you're stoozing, but that's not something you should consider until you know what you're doing with credit cards etc.

As you've not had a credit card before most people will recommend that you apply for one with your bank. Use that for at least 6 months before thinking about applying for a better one, you need to build up your credit file to get ones like cash back cards.

I'm not sure exactly what you're referring to when you say you've read the 'credit card section'. You may have already read this guide but if not it's worth doing so:

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

There's only one thing I'd personally change and that is the following:

"Credit card companies may reject you for always repaying cards in full.
While you feel like the perfect punter, for credit card companies you’re a nightmare. If they can spot this trend, you’re likely to be rejected."

The fact that credit card companies don't disclose their credit scoring criteria makes it practically impossible for anyone to know why they're rejected. As such, the assumption it's because they pay in full is just personal opinion.

My personal opinion is what I mentioned earlier; that there's always likely to be another contributing factor and it isn't solely because balances are paid in full every month.

In short; I recommend you pay the balance off in full every month and ignore any of the suggestions that card companies won't like it.

Sorry it's quite a long winded post but hopefully it's of some help.

ecdub

Thanks very much for your reply. I am a recent graduate, still living at home, so do not have lots of expenditure - but having never had a credit card I thought it would be good to get one to build up a history. However, I would fall into the category of, not using it a lot, and paying it off in full.

Would you recommend I just stayed with a debit card till my expenditure rises?

poker_face

ecdub wrote: »

Thanks very much for your reply. I am a recent graduate, still living at home, so do not have lots of expenditure - but having never had a credit card I thought it would be good to get one to build up a history. However, I would fall into the category of, not using it a lot, and paying it off in full.

Would you recommend I just stayed with a debit card till my expenditure rises?

It might be worth waiting until you will get more use out of it.
Here is lots of useful advice

ecdub

thanks gents, as I now have a job! I will have a much higher expenditure, so I have now got a card, and will use it for spending and pay off the balance each month.