Credit score - how good is "good"?

Beatlefan

Hi, I wonder if any of you helpful MSEs can help with a query about my credit rating and chances of getting a card please?

I checked my credit score with Experian recently. I have one default on my credit record (on an old credit card 5 and a half years ago), although my credit score is "good" according to Experian with a score of 900. The rest of my credit record is fine (although I need to cancel some old store cards I never use any more).

Now that lenders are being much more picky, does anyone know if I would be take out a decent credit card with a credit rating like that? Experian was suggesting some high interest credit cards for me rather than the 0% balance transfer ones or low interest ones. Is this because I'm still a risk, even with a good credit score? I'm worried about even applying, as I don't want a failed application down on my credit file.

I've got a loan (which will be paid off in 18 months time) and a mortgage, with my house worth 1.25 times the amount remaining on the mortgage. I have a charge card and a debit card, but no other credit.

In the seemingly unlikely event I'm able to get a 0% balance transfer credit card, would I be able to put my loan amount on it and have the rest of the life of the loan with no interest?

My second question is re current accounts. I have one joint one with my wife for the food shopping, etc. I was thinking of adding her to my main account that my wage goes into, and which all the bills, mortgage are paid out of. We want to do this - (a) so she has access to the bills account and (b) so she can have access to the benefits that come with this particular account (identity theft protection, travel insurance, etc). My concern though is whether this will harm her credit score - both in terms of adding her to my account and in terms of my default in 2004?

My default occurred in late 2004 when I was ill for a couple of months and forgot to pay my credit card monthly payments (I'm much more organised now). I started paying monthly payments again as soon as I was well and then settled the account completely in 2005, closing the account. Presumably though, the default will stay on my credit file until the sixth anniversary of settling the total debt, rather than the sixth anniversary of the default itself? Is that right? I don't have a credit card now, just my charge and debit card. The charge card is paid off by direct debit each month. I'm thinking that, if I can't get a decent credit card, I might take out one of the high-interest ones and pay it off each month to improve my credit score as Martin suggests. :money: If I do this, does anyone know how soon my credit score would improve and how soon I would be able to apply for a better card? I know you should wait awhile before re-applying after a failed application, but presumably if you have a successful application for a card, you can apply again fairly soon for a better one without it affecting your credit score?

Sorry there's so many questions, but many thanks to anyone who can help with any of them. I know there's some wonderfully helpful people on here. :A :T:T:T

CannyJock

Couple of points:

• Time between applications is the same whether you're accepted or not - it's only the search that matters. If you limit yourself to 1 every 3 months shouldn't have too much of a negative impact
• Experian credit score is mostly meaningless. It doesn't ask for info like income
• Right now you don't have any credit cards, so that could be an obstacle in itself
• Unless your loan specifically allows overpayments you wan't be able to part-settle it as you suggest

td_007

Beatlefan wrote: »

I checked my credit score with Experian recently. I have one default on my credit record (on an old credit card 5 and a half years ago), although my credit score is "good" according to Experian with a score of 900. The rest of my credit record is fine (although I need to cancel some old store cards I never use any more).

Beatlefan wrote: »

In the seemingly unlikely event I'm able to get a 0% balance transfer credit card, would I be able to put my loan amount on it and have the rest of the life of the loan with no interest?

If you get one that allows bank transfer then you can pay off your loan (or part of depending on the credit limit you get & loan t&c)- you most probably will have to pay BT fees unless you have an offer on that as well

Beatlefan wrote: »

My second question is re current accounts. I have one joint one with my wife for the food shopping, etc. I was thinking of adding her to my main account that my wage goes into, and which all the bills, mortgage are paid out of. We want to do this - (a) so she has access to the bills account and (b) so she can have access to the benefits that come with this particular account (identity theft protection, travel insurance, etc). My concern though is whether this will harm her credit score - both in terms of adding her to my account and in terms of my default in 2004?

If you already have some other financial association e.g mortgage, credit card then you and wife and financially linked so adding your wife's name is not going make much of a difference.

Beatlefan wrote: »

I'm thinking that, if I can't get a decent credit card, I might take out one of the high-interest ones and pay it off each month to improve my credit score as Martin suggests. :money: If I do this, does anyone know how soon my credit score would improve and how soon I would be able to apply for a better card? I know you should wait awhile before re-applying after a failed application, but presumably if you have a successful application for a card, you can apply again fairly soon for a better one without it affecting your credit score?

This is a good option to give confidence to the lenders - even if credit limit is low, if you create a good repayment history, then you will stand a better chance of getting good deals.

izools

Step 1 - FORGET the score Experian gave you - it's meaningless.

Step 2 - how would you rate yourself? Are you in a stable job with a good income? Have you been with your employer and lived at your address for a long time? If so, this is good credit score wise.

Step 3 - How much available credit have you got accross all your accounts? If you already have limits adding up to 50% or more of your annual salary, creditors are unlikely to further you more credit

Step 4 - how much do you owe? More than 1/3 of your annual salary? More than 2/3 of your credit limits? If so, you may be considered to be under debt stress and declined credit

Step 5 - when did you last miss a payment? More than a year ago, OK. Less, no chance.

Step 6 - how many applications have you made in the last six months for anything credit scored? Three or less, OK. More than that, wait a while.

The default is old enough to not have a big impact especially if it is paid off.

You could try:

Tesco (RBS Group)
Silver Mastercard (Sygma Bank)
Bank of Ierland (Post Office Card)

They have looser criteria than some of the big boys like MBNA (Virgin) or Egg (Citi)

Good luck! And keep us posted

EDIT: A good fact to remember: Between 33% and 66% of the score a creditor assigns to you when you apply is based on data that has nothing to do with your score that you pay for i.e. job, house, dependants, marital status, stability, debt:income ratio, debt:limit ratio, etc. All things that Experian don't take into account when they show you your "One score fits all" FAKE score

Beatlefan

Thanks so much guys. It never fails to amaze me how helpful people are on MSE. :T :T:T

Thanks for the tips on the Experian score. I must admit I was getting hung up on that.:o

To answer your questions izools, yes I'd rate myself well - I'm in a settled, secure job with the civil service, where I've worked for 18 years. I've also been at the same address for more than 10 years. Our house is worth around £190-200k and our remaining mortgage is just over £80k.

So we're doing okay after doing our best to use Martin's tips to get things back on track after a shaky time and paying off other debts and cards over the past few years. It's just that the existing loan and mortgage payments are still reasonably high and we'd like to try and get things down a bit.

We've thought of coming out of our fixed rate mortgage (5.2% fixed til late next year) and paying the penalty if we could get a better rate with our existing provider or a different provider - as long as my credit score was okay.

Re available credit - I've got overdraft facilities on my current account - I could go thousands overdrawn if I wanted. But since we got our finances a lot more in order over the last couple of years, I've only gone a few hundred overdrawn every so often, and even then it's paid off the next month. We're now very strict about that. Our joint current account will also let us go overdrawn quite a bit (around £700, I think), although we only normally go over by about £100-£150 on odd occasions and pay it off the next month.

My charge card would let me spend, spend, spend (if I wanted to), but it's then taken out automatically from my current account the next month, so I'm never tempted to use it too dramatically.

So my available credit doesn't add up to 50 per cent of my salary, but could be quite high if I used my overdraft all the time. It might be worth asking my bank to reduce my overdraft facility a little, especially as I only ever use a fraction of it. What do you think?

My loan balance isn't more than 1/3 of my annual salary, although my mortgage balance is more than my annual salary. I don't have any other debt, apart from my overdraft facility, which as I say we barely touch.

I last missed a payment (on my old credit card) in late 2004, but as you say this is now paid off.

We've not applied for anything credit scored in the last six months (not since my wife applied for car insurance quotes last August - for some reason they did a credit check even though we wanted to pay the insurance in one go rather than direct debit, so not sure why they credit-checked us).

I'm trying to reclaim PPI from Tesco, so may try one of the other two cards you mention! I'm a NatWest customer, so don't know if I would get preferential treatment for their on-line 0% balance transfer card as an existing customer? Probably not!

Td007, thanks for your tips. Do you know which cards allow bank transfers that might allow 0% balance transfers for my loan? I wasn't sure if you could do this with a loan or not. Are the cards you refer to the same as the ones that izools mentioned? I was thinking of settling all my loan that way. There would be a penalty for early settlement, but I'd also be due a part-refund of PPI I hadn't used which would pay some of the penalty.

Do you guys think it's worth giving an application for a 0% card a go? Or should I go for one of the high-interest ones first and then try again in 3 months or so for a 0% via a balance transfer?

Finally, you say that as I already have some other financial association, then my wife and I are already financially linked so adding my wife's name is not going make much of a difference. Thanks for that, and presumably adding her to my account won't necessitate a credit search, so won't show up on our credit files either?

Thanks again guys! :A

izools

Beatlefan wrote: »

So my available credit doesn't add up to 50 per cent of my salary, but could be quite high if I used my overdraft all the time. It might be worth asking my bank to reduce my overdraft facility a little, especially as I only ever use a fraction of it. What do you think?

My loan balance isn't more than 1/3 of my annual salary, although my mortgage balance is more than my annual salary. I don't have any other debt, apart from my overdraft facility, which as I say we barely touch.

I last missed a payment (on my old credit card) in late 2004, but as you say this is now paid off.

When I say available credit limit, I mean adding up the available balance on all and any overdrafts you have + the limits on any store and catalogue accounts you may have + the limits on any credit card accounts you may have (in use or dormant) + the outstanding balances on any unsecured loans you may have (exclude mortgage(s)).

It this adds up to over half your annual salary you may find closing and / or reducing limits on some of your accounts gives potential lenders more confidence.

Remember we're referring to limits not balances here.

From the sounds of it you'll be fine, your default is ancient and satisfied and is but one slight negative amidst a shining beacon of a credit file that belongs to someone in a very stable position. I wouldn't expect you to have any problems with credit whatsoever.

If you want to be more confident re: acceptance, products offered by your bank are the best route to take.

Sarahjane23

I'd say you'd have very little chance of being declined credit, if that's what you are looking for - although are you actually looking to borrow or are you just looking for ways to improve your score?

I've found that having a small balance, say £50, on my c credit and setting up a dd to pay of the minimum amount was a useful way of improving my score - it should I had repayment ability but also that the c card company made some money fromme. If I'd paid back the whole amount each month they'd make no money from you and are probably less likely to lend to you in the future.

It's ironic though - a friend of mine (who very luckily) has never had to borrow money as her husband took care of the finances, suddenly found herself needing to borrow but couldn't as she'd had no credit history.

I think the c card companies are always looking at new ways to assess their risk and lending criteri, so no doubt this advice will change over time! Hope that helps

CannyJock

Beatlefan wrote: »

Do you know which cards allow bank transfers that might allow 0% balance transfers for my loan?

Do you guys think it's worth giving an application for a 0% card a go?

Cards that will transfer funds to your bank account are listed on the stoozing site http://www.stoozing.com/sbt.php. You'll need a settlement figure from the loan company first to see how much you need to be able to clear the loan in full. If it's a huge amount then may not be worth the application.

Natwest (RBS) cards have always been okay to deal with. Decent credit limits and a series of repeat 0% deals. Infact, promo cheques dropped through the letterbox 0% till September for 3% fee - will be phoning them today to try and get the fee waived/reduced/capped

It's worth applying for a 0% card if there's one that will benefit you - like a 0% purchase card where you can put your normal monthly spend on it, and only make the minimum payment on the card during the 0% promo period. You then take the money that you would have spent and stick it in a decent paying current/savings account (A&L/Santander 6% account, LTSB vantage 4% account). Before the 0% promo period ends you take the money you've saved up and clear the balance in full. You get to keep the interest earned List of 0% purchase cards http://www.stoozing.com/purchases.php

CannyJock

Sarahjane23 wrote: »

If I'd paid back the whole amount each month they'd make no money from you and are probably less likely to lend to you in the future.

Not actually true. You've paid them (hopefuly not a huge amount) interest unneccessarily. The only money that card companies make from me is balance transfer fees and merchant fees on purchases. I've typically got 40-70K of credit available.

Sarahjane23 wrote: »

It's ironic though - a friend of mine (who very luckily) has never had to borrow money as her husband took care of the finances, suddenly found herself needing to borrow but couldn't as she'd had no credit history.

Classic problem - no credit history for them to assess so they decide not to take the risk. Your friend should look into sub-prime cards and read the threads on building your credit rating.

Beatlefan

Thanks guys, that's really helpful.

Canny Jock, you mention that some cards will transfer funds to your bank account (thanks for the link), but say if it's a huge amount then it may not be worth the application. My loan settlement figure would be between £8-9k. Is that likely to be too high?

I notice that NatWest aren't on the list of cards that allows transfers to bank accounts, but I see they do a 0% purchase card, so that might be a good way to go if my loan balance is too high to try for a bank transfer. I like the idea of earning interest on normal expenditure - as long as I pay it off at the end of the period of course!

I'm much more reassured about my credit rating now. Thanks for clearing up a few myths. Am wondering whether it's worth seeing if we can move our mortgage to a new provider if it will be worth paying the ERC. Had put off looking into that, because of the credit rating.

Thanks again everyone. :beer:

CannyJock

Beatlefan wrote: »

My loan settlement figure would be between £8-9k. Is that likely to be too high?

I'd check with them - lots of people get a nasty surprise when they get their settlement figure from a loan company

It's at the top end, so unlikely you'd get that but not impossible. MBNA allow you to SBT 95% of your credit limit so if you got a card with a 10K limit then that would cover it. But you've got no recent credit history from what you said before.

If I were you, I wouldn't be aiming for a 0% SBT card as a first application. I think it's unlikely you'd get enough of a limit to work with - unless you have some savings that could be raided to top up the SBT?

I'd be thinking along the lines of a 0% purchase card, with the aim to basically live on that for a year and save every penny you can towards clearing the loan. How long would it take you to pull together £8-9K if all your monthly outgoings were on a credit card?

You can make use of a 0% purchase card regardless of the limit on it, and it'd test the waters to see what sort of limit you're offered. I'd use that as a guide for a "second" application 3 months later. If you get a 0% purchase card with a large limit then check with your family if they've got any large purchases planned that you can put on your card and they can give you the cash for