A little help improving my credit rating

Hummel

Okay, so I've done plenty of reading but am still confused about exactly what my best plan is for improving my credit score.

Here is a full diagram of my missed payments since I first obtained credit. Its pretty bad... i48.tinypic.com/1zq3b0j.jpg

First account is a student debit card, with 1000 pound overdraft. It is currently being shut down because I went slightly over that amount, and was away from home when letters arrived demanding I rectify this. The bank has demanded that I pay it off all in full, which I have done, and then it will be shut down completely. I'm not sure how this will look on my credit report?

Second account is a credit card, 600 pound limit. Recently completely paid it off. As you can see my payment history has been consistently bad until about a year ago.

Third account is another current account, with no overdraft. I ended up somehow going into the negative in 2010 without realising it for almost the entire year. Eventually fixed it but its a dark mark on my record.

Fourth and fifth are phone contracts.

So, in the last year I've got my act together on my credit card but ended up messing up on my debit card. I've been accepted by the Co-Op for a new student account, despite my terrible history. (I had to do this as my current student account is getting shutdown).

I want to work towards having much better credit worthiness, and was wondering based on my situation what the best move would be. I am paying off my current credit card every month for the last year, will continue to do so. I do not intend to use the new overdraft but it will put two grand of available, but unused, credit on my file - which is a good thing..right?

I believe I could get one of the credit cards made available to those with a bad score. Would it be worth it? Is having two credit cards being paid off every month from now on going to make a positive impact? Will it give me a better score quicker?

Would getting some sort of joint current account with my dad benefit my score? He has an excellent score.

How long am I looking at to build up a good credit score?

Thank you for reading and any help. Sorry for so many questions!

carousels

Oh wow.

Try not to fret over this too much - however do learn from your mistakes! I was in a similar situation. Student account, student credit card plus two more credit cards with Capital One and Vanquis. Oh, and about four store cards and they were all either horribly overdrawn and/or way past their limit.

I took a look at my credit report and my score was really, really low. There's no much you can do overnight. There's no magic fix. It has to be gradual. Slowly, I started paying off everything and as soon as each account was paid off, I began closing them down too.

Two years later, I have one current account ( with an overdraft ) and one credit card. And guess what? My credit report is looking good too!

I wouldn't recommend that you get another credit card. Just stick to the one you have and pay it off completely. After you have done that, just spend £20 or so, on it every month and pay it off in full every month too. That will show lenders that you're not only using the card but you're being responsible too by managing your account well. Same goes for your overdraft. Don't use it all just because it's there but keep it for emergencies.

I thought having more credit cards and using them correctly will improve my score faster but in reality, there's too much temptation because you have access to all this money. I don't know for certain but in my case having just one credit card has worked fine and improved my score within two years. And not only that, but once they found that I was using the card responsibly they even gave me a credit limit increase.

You're credit report may look bleak now but don't let that discourage you. In a few years, it will improve but in order for that to happen, you must make the change now.

Good luck!

sindakit

Hey carousels,

Like the OP, I also have a fairly bad rating that i'm hoping to improve. I've already taken the first steps from following info from this site but I have one question, albeit a silly one, about paying a card off in full each month.
So yeh, of course I know what this means and that's not a problem, but I have had to go with one of the high interest rate cards (49.9% :eek:) that i plan to use to purchase some basic things with each month. In order to avoid these frightening interest rates on my card does payment have to be made prior to the card company sending out the monthly statement? From the paperwork it seems payment can be made at anytime and interest is applied once a statement is produced. Am I following this correctly or do you pay once you receive your statement and accept any interest they have applied per month?

JimmyTheWig

Hummel wrote: »

I want to work towards having much better credit worthiness, and was wondering based on my situation what the best move would be. I am paying off my current credit card every month for the last year, will continue to do so. I do not intend to use the new overdraft but it will put two grand of available, but unused, credit on my file - which is a good thing..right?

Sounds great.

I believe I could get one of the credit cards made available to those with a bad score. Would it be worth it? Is having two credit cards being paid off every month from now on going to make a positive impact? Will it give me a better score quicker?

Do you mean a card for those with really bad credit that you have to pay a fee for? I wouldn't bother with that, just carry on with the card you have.
Or do you mean a card with a very high interest rate? This wouldn't be a bad thing. As long as you pay in full, on time each month the high interest rate won't matter. And I would _guess_ (and it can only be a guess as no-one knows how different organisations rate different scenarios) that two cards would be better than one.
But as has been mentioned, don't do this if the temptation to spend on it will be too great. And don't do it if you are not totally sure you will be able to keep on top of all the payment dates, etc.

Would getting some sort of joint current account with my dad benefit my score? He has an excellent score.

No, don't do this. I doubt it wuold improve your score. But it would definitely drag his down.

How long am I looking at to build up a good credit score?

In today's climate, it won't be good until all that nastiness has dropped off, so I think you're looking at another 4 years.
But should be reasonable, I would have thought, in a couple of years.

JimmyTheWig

sindakit wrote: »

In order to avoid these frightening interest rates on my card does payment have to be made prior to the card company sending out the monthly statement? From the paperwork it seems payment can be made at anytime and interest is applied once a statement is produced. Am I following this correctly or do you pay once you receive your statement and accept any interest they have applied per month?

Certainly the way the vast majority of credit cards work is that they send you a statement once a month. On that statement is a "payment due" date, which will be a couple of weeks after the statement date. If you pay the full balance on the statement by that due date then you pay no interest.

If this is a normal card with a high interest rate then that will be how it works. If it isn't a normal card then best to check for certain - maybe post the terms and conditions here so someone can check?

lea_t88

Hummel wrote: »

I want to work towards having much better credit worthiness, and was wondering based on my situation what the best move would be. I am paying off my current credit card every month for the last year, will continue to do so. I do not intend to use the new overdraft but it will put two grand of available, but unused, credit on my file - which is a good thing..right?

Is your new overdraft with your new student account and if so is it interest free? If its interest free it may be worth using some of this to pay off some of your other debt at higher APRs.

carousels

Hi Sindakit,

My credit card also has a very high APR. So what I tend to do is pay my balance off in full as soon as I get the statement. As a result, I have never had to pay a penny in interest.

However, I suppose there MIGHT be different rules for different cards? You're better off either asking your credit card company or checking the Terms & Conditions yourself.

I'm terrible at this type of thing so I asked my credit card company to explain it to me. In baby words.

opinions4u

If you already have an active credit card there is little point getting another one to improve your credit rating.

The best way to sharpen up your profile with potential lenders is:

1. Make sure you're on the voters roll.
2. Pay all your commitments on time.
3. In the case of your credit card always pay more than the minimum payment.

It really is no more complex than that.

When you get the debt down to nil, don't use the card again until you receive a statement showing a nil balance and no interest charge. Then you can use it again, paying it off fully every month to ensure no interest charge.

Hummel

Thank you all so much for your help.

I've already now been offered and accepted a new credit card. Its the Capital One card with 0% on balance transfers until June 2013.

My overdraft on my debit card is completely paid off. Credit card completely paid off. As a matter of fact, in the coming weeks I'm coming into a fair bit of money that will leave me financially comfortable for a while.

If I have trouble in the future paying off my credit card I will transfer the balance to the new Capital One card and pay off the minimum until I can afford to do it in full. Otherwise I will just do a weeks shopping on it once a month which will get direct debited out of my student account - which even if i'm low on money, will have 2 grand of 0% interest overdraft available.

I've tried to set things up so its as hard as possible for me to do anything stupid in the future.

opinions4u wrote:

1. Make sure you're on the voters roll.
2. Pay all your commitments on time.
3. In the case of your credit card always pay more than the minimum payment.

It really is no more complex than that.

When you get the are debt down to nil, don't use the card again until you receive a statement showing a nil balance and no interest charge. Then you can use it again, paying it off fully every month to ensure no interest charge.

I am doing all of those things However, I've not been waiting for my next statement to show 0 before using my card again - I didn't realise this was important. Is this so it shows up on my credit report as 0? Surely it shows up that I've paid X amount that month anyway and the bankers algorithms will deduce I've made payment in full at some point during the month? Thanks!