APR temporarily dropped to help me maintain payments, will it effect credt rating?

WLITC

Virgin have agreed to reduce my APR for 6 months to help me maintain my payments (I explained that I was going to struggle to meet my next payment and they passed me through to a dept that went through my outgoings and then agreed to reduce the rarte fior 6 months) . Anyway, what I'm curious is whether it'll have any inpact on my credit file/rating. I'm assuming not because its just effectively a rate cut, but I wasn't sure whether Virgin might flag something up on my credit file as I've approached them and said I would have trouble paying. Any thoughts?

CLAPTON

you need to ask them but I would image that they will mark this as an arrangement to pay (AP) on your credit file

WLITC

CLAPTON wrote: »

you need to ask them but I would image that they will mark this as an arrangement to pay (AP) on your credit file

Does AP negatively effect your credit rating?

Cash_Flow

welshladinthecity wrote: »

Does AP negatively effect your credit rating?

It sure does ..............

YorkshireBoy

I'm curious as to how simply reducing your APR (from what to what?) will help in any great way?

You'll still have to meet the, say, 2.5% minimum payments. Whether it's 2.5% of, say, £4,000 or 2.5% of, say, £3,940 is irrelevant isn't it, being as the difference is only (£100 - £98.50 £1.50 a month.

Unless I've missed something?

If I haven't missed anything, you'll be trashing your credit rating for 'pennies' won't you?

WLITC

YorkshireBoy wrote: »

I'm curious as to how simply reducing your APR (from what to what?) will help in any great way?

You'll still have to meet the, say, 2.5% minimum payments. Whether it's 2.5% of, say, £4,000 or 2.5% of, say, £3,940 is irrelevant isn't it, being as the difference is only (£100 - £98.50 £1.50 a month.

Unless I've missed something?

If I haven't missed anything, you'll be trashing your credit rating for 'pennies' won't you?

Well I don't know quite how it works either, but what they proposed meant min payment would drop from £300 to about £130 a month. From what I recall from the original converstion (I actually agreed to the 6 months deal about 4 months ago, but speaking to them this week prompted me to thing about its effect on my credit file) Anyway when I originally approached them and said I might have problems paying the next months payment they put me throught to a different dept (forget the name of it) and they took me through my budget, outgoings etc and then said they could reduced my APR for 6 months and then would drop my minimum payment from nearly £300 to £130. Didn't really think about it, but if min payment is 2.5% and my balance doesn't really go down much then APR shouldn't logically make a difference. Maybe its so weird way the CC companies caculate payments. Maybe a % of the min payment is made up of just the interest accumlated that month and by reducing my APR from twentysomething to 12% it reduces the payment?

Perhaps someone else who's had a similar kind of deal can enlighten?

CLAPTON

welshladinthecity wrote: »

Well I don't know quite how it works either, but what they proposed meant min payment would drop from £300 to about £130 a month. From what I recall from the original converstion (I actually agreed to the 6 months deal about 4 months ago, but speaking to them this week prompted me to thing about its effect on my credit file) Anyway when I originally approached them and said I might have problems paying the next months payment they put me throught to a different dept (forget the name of it) and they took me through my budget, outgoings etc and then said they could reduced my APR for 6 months and then would drop my minimum payment from nearly £300 to £130. Didn't really think about it, but if min payment is 2.5% and my balance doesn't really go down much then APR shouldn't logically make a difference. Maybe its so weird way the CC companies caculate payments. Maybe a % of the min payment is made up of just the interest accumlated that month and by reducing my APR from twentysomething to 12% it reduces the payment?

Perhaps someone else who's had a similar kind of deal can enlighten?

you really need to read the T&Cs of your CC agreement

but some CCs calculate the minimum payment as the interest plus fees plus a fixed amount so in that case a reduction in the interest would lead to a reduced minimum payment
but read the T&Cs

also get copies of your credit files and see what they say... why speculate when you can know for certain for couple of quid (or even free if you use the free offers).

YorkshireBoy

The Virgin/MBNA T&Cs (for new customers at least) are 1% of the balance before interest plus the interest added I believe.

So yes, if they've halved your interest rate that should make a reasonable difference...but a £170 a month reduction still sounds a lot to me.

oscar52

MBNA (virgin) have numerous ways of calculating the min payment now.

Could be 1% 3% or 5% plus interest
fees charges interest etc plus £5
fess charges interes etc pluc £10
same as plus £25

All depends when the account was taken out and if there have been any statement updates - ie payment dates.

WLITC

just got a letter today from MBNA/Virgin comfirming that they are extending my reduced APR til March (which is what I spoke to them about this week), anyway on part of the letter is says during this time (i.e up to March 2010) providing I maintain payments, they will continue to report my account as being up to date with credit ref agencies. So does that suggest I have not be marked as AP?

Finally, another quick question. When they initially agreed this plan a few months back, they reduce my credit limit from £14.7k, to £14k but didn't say I couldn't use it, but on the new letter that arrived today is says not to try and use the card or credit card cheques as they have placed a temp restriction on the account. Prob is I desperately needed some new shoes yesterday (don't get paid until Tuesday) so I stuck it on the virgin card, it was only £20 tho. Obviously at the time I didn't know I shouldnt use it until I saw the letter. Is this likely to be a problem?

YorkshireBoy

welshladinthecity wrote: »

...providing I maintain payments, they will continue to report my account as being up to date with credit ref agencies. So does that suggest I have not be marked as AP?

Why speculate/guess/assume/think/etc when you've already been given the best advice (see CLAPTON's post #7, last para). Spend £2 (or grab a free 30-day free trial) and find out for certain!

Is this likely to be a problem?

If you had told me you were struggling, and I'd helped you as a result, I wouldn't be too impressed that you continued to spend more. That said, you could always argue that you weren't aware of this new condition.