Conflicting suggestions to improve credit rating, which is best?

solipsisticus

Hi all,

I'm in the process of trying to improve my credit rating to the point where I'll be able to get a decent mortgage. I'm self employed, which seems to make it trickier!

I currently have a small overdraft which I don't use often, and one credit card that I opened up last year and pay off in full every month.

My Experian report suggests that the short time I've had the credit card is a negative factor as it's bringing the average age of my accounts down, and another negative factor is that I don't have any successfully settled non-mail order accounts.

Closing the credit card would surely help both of these, but I've read that this will hurt other areas of my rating by reducing my total available credit and affect my percentage of credit used, though that could be managed.

Does anyone have similar experience to say whether I should close the card or keep it open?

Tixy

I would definitely keep it open.

Your experian analysis of your report is not always a useful guide. Yes its possible potential lenders would prefer a longer credit history on your card - but closing it down won't actually help that.

Keep it open and keep an active credit history showing you are handling credit responsibly.

InsideInsurance

Building/ repairing credit is not an over night task unfortunately, even if you do all the right things it can take an age for it to come back on to your records anyway (Barclays advise that given their update process when you look at your file it can be as much as 3 months old).

Added to that is the fact that all lenders have their own rules on how to weight the data. Whilst some things are more universal (defaults = bad) when you get into the area of a 4 month old credit card keep or close then it will vary massively more.

Personally I would guess to keep the card but ultimately it is your choice.

CLAPTON

using a credit card properly is a plus (your report would be worse without the card)
so use the card every month fopr thigns you buy anyway and pay in full

stop using the overdraft as these days regular use of the OD is seen to show poor money managment

mortgages don't as such need 'good' credit ratings; rather they want no bad credit issues, a good deposit and a good income relative to loan

solipsisticus

Ok, seems the consensus is to keep it. I think I'll do that and just use it where I might otherwise have used my overdraft. Thanks for the input!

jamesd

Sebastian Bermudes, it's very unlikely that most posters here will be entitled to a FICO credit score even if they wanted one. It's a US score and few here are in the US.

solipsisticus, you might also consider taking out a small personal loan, then using early settlement of most of the loan balance. The small remaining amount owed won't cost you much but the added on time entries in your credit record and the different type of credit will be helpful to your score.

Self-employed will make the mortgage task harder. Having a well-established record of borrowing and repaying will help. You can expect to have to provide accounts for a few years as part of the application process for the mortgage.