Minimum payments damaging?

Mr_Stinge

Hi All, I have searched the forums and failed to find the answer to this question: does making minimum payments on a credit card damage your credit rating?

I'm thinking of stoozing at the moment and whilst I have no bad debt, I have no real credit history and so have been turned down for cards in the past. I'm looking to build my credit rating and I have guessed that minimum payments dont adversely affect your rating since many people seem to stooze effectively!

Thanks in advance for your help!

Eonel

Making only minimum payments does show on your credit record and may be viewed as negative.

TBH stoozing is normally done by people with good credit records. It is only profitable with higher credit limits + people with good credit records can afford to take the hit of some minimum payment indicators.

In your case, to build a credit record you should get a credit card, use it every month ( maybe put petrol through it ) and pay it off in full each month.

Mr_Stinge

Thank you Eonel, good job I checked then as my CC should be arriving any day now. I will just build up my rating as you say and be a good little payer!

OllyM

Note that even paying £1 above the minimum payment will prevent the marker from appearing on your credit file.

chris-j

Depends, if it's an intro rate the credit agencies also show this so even if making minimum on a 0% deal any company looking can also see its an intro rate. Guess though that this in itself could work against you since you deprive them of interest income.
No real way to second guess, probable major consideration will always be how much available credit you have available which makes it important to close I active accounts unless you have good reason to keep them open.

Saver_Saver

If you have been paying the minimum payment for say 12 months, how long does this negative effect take to clear if you say start paying minimum + a little extra ?

3 months ?

HappyMJ

Saver_Saver wrote: »

If you have been paying the minimum payment for say 12 months, how long does this negative effect take to clear if you say start paying minimum + a little extra ?

3 months ?

It may not be negative at all. If the interest rate is low i.e 0% then paying the minimum is recommended for stoozing effectively. You would save what you would spend in a savings account and when the 0% expires you pay the card off in full.

JimmyTheWig

The markers will stay on there for years and years, Saver_Saver. But given that I can't see it making that much difference I'm certainly not convinced that it's anything to worry about for years and years.
If you've got an outstanding balance of £1000 and you make a payment of £22 which is marked as the minimum, I don't see this as being scored much worse than if you make a payment of £23 not marked as the minimum. If they're interested in something like that they will see that in either case you appear to be struggling to pay off the debt, or that you are prioritising something else.

Each company will treat different factors differently (which is why a "credit score" that you pay a credit agency for is meaningless) and they never tell you the rules that they use. So it's an impossible one to answer.
As the OP suggests, those of us who have stoozed in the past haven't found it a problem.

JimmyTheWig

OP, the reason most people wait until they have a good credit record until they stooz is that most people without a good credit record won't get accepted for the best cards.

But it sounds like you have been accepted, so I don't see a problem with you stoozing, assuming that you know what you are doing and you can be disciplined to stick to it.

If you're not too happy about your credit record and you've got an important credit check coming up in the near future (e.g. new mortgage, car loan) then you may want to reconsider.
But in terms of building up a credit history, stoozing's a great way to do it if you qualify.
You may have a lower limit than other stoozers, but unless you're being hit with a minimum balance transfer fee I can't see that as being a particular problem. Just means you won't make as much money as some people do.

jamesd

The purpose of the only minimum payment flag is to help to identify people who may be having trouble paying. At least one stoozer has been contacted by their card company after making minimum payments on the card even though it was in a deal. No problem after a discussion explaining about the deal.

Because it's a negative marker I set up a standing order to make a payment of £1 just before the due date. The cost to me of the extra payment is minimal and it beats an unnecessary negative marker, however slight the negative might be.

Since stoozers typically have excellent credit records they are less likely to be significantly negatively affected than others.