Bad credit - credit card newbie

barmstrong

Me and my partner have been trying to get a mortgage together for our 'forever home'. I have had several loans and finance agreements and apart from a situation 2 years ago when I was between jobs (missed 3 payments but paid back as soon as I could) all is paid off and complete.

When the mortgage company rejected us we both checked our credit score, hers is fair mine is bad. It seams my miss payments have destroyed my score, we're now not going to be able to get the mortgage for a few years until the score increases.

I have been on this website for some time looking at improving my score and it seams a credit card might be a good idea - paying back in full each month etc.

I am a bit of a credit card newbie, never had one!! I don't understand the interest rates parts, for example;

The Capital One progress card on the -Cards with bad credit page - is 29.9% APR. I understand APR and it is calculated on the amount owed each year but, it says in the bold black letters

starts off by giving you a nasty 29.9% representative APR - always pay off in full to avoid it.

- the bit that confuses me is the pay off in full to avoid it part.

If I spend £500 per month on that card and pay back in full each month, I pay 0%?? Is that right??? If I keep doing it for 12 months do I still pay nothing??? If so what's the point in 0% cards, if I'm wrong, where have I gone wrong???

I'm sure this is a simple 1 or 2 word answer for such a ridiculously long question and for that I apologies.

Thanks

grumbler

barmstrong wrote: »

...If I spend £500 per month on that card and pay back in full each month, I pay 0%?? Is that right??? If I keep doing it for 12 months do I still pay nothing???

Yes - this is how all (majority of?) credit cards work.

If so what's the point in 0% cards,

During the introductory period no interest is accrued even if you make only minimum payments each month, not full balance.

JakeGreen

barmstrong wrote: »

If I spend £500 per month on that card and pay back in full each month, I pay 0%?? Is that right??? If I keep doing it for 12 months do I still pay nothing??? If so what's the point in 0% cards, if I'm wrong, where have I gone wrong???

The point of 0% cards is that they allow you to spend money and have a number of months where no interest is accrued giving you more time to pay the money back. The minimum payment is always required each month and the minimum payment varies from company to company and it may depend on the amount of money owed.

Yes having a credit card which is managed responsibly will certainly help to beef up your credit worthiness. Try not to make any more late payments though!

barmstrong

I have a plan, I take the said credit card, withdraw £400 per month cash as monthly spending money, seperating into 4 lots of £100 for weekly spending money, any left over at the end of the week for the savings pot. End of month just after payday pay the £400 back, same next month etc ... this will cost me nothing?

Just want to double check...

jonesMUFCforever

You cannot withdraw cash from most credit cards without being charged a fee and interest.
It will only work if you use the card to pay for things like clothes, shopping , petrol etc.
After paying back the credit card every month any surplus you can save.

grumbler

barmstrong wrote: »

I have a plan, I take the said credit card, withdraw £400 per month cash as monthly spending money, seperating into 4 lots of £100 for weekly spending money, any left over at the end of the week for the savings pot. End of month just after payday pay the £400 back, same next month etc ... this will cost me nothing?

Just want to double check...

The above interest-free period (if balance paid in full) applies to purchases only. Cash transactions (including some 'purchases', e.g. gambling deposits) are treated differently.

JakeGreen

barmstrong wrote: »

I have a plan, I take the said credit card, withdraw £400 per month cash as monthly spending money, seperating into 4 lots of £100 for weekly spending money, any left over at the end of the week for the savings pot. End of month just after payday pay the £400 back, same next month etc ... this will cost me nothing?

Just want to double check...

Withdrawing cash on a credit card will hurt your credit score and won't look good if you're trying to get a mortgage.

It's also very expensive. You'll be charged a percentage up front, around 3% and many cards will charge you interest straight away for cash withdrawals.

Just use the card for buying things, within your weekly/monthly budget and pay the statement when it arrives.

Good luck!

barmstrong

thanks for the replies, great help.

I have now applied for the card and should get it in the next few days.

We have decided to do our big monthly shop (around £200) on the card each month and pay it off in full, will it increase my credit score if I spend more on the card or does it make no difference?

Also how long does it take to recover my score? does it work like increase by 20 points for each payment paid or not?

MrSilk

barmstrong wrote: »

thanks for the replies, great help.

I have now applied for the card and should get it in the next few days.

We have decided to do our big monthly shop (around £200) on the card each month and pay it off in full, will it increase my credit score if I spend more on the card or does it make no difference?

Also how long does it take to recover my score? does it work like increase by 20 points for each payment paid or not?

Can take years :eek:

And ignore these 'points' CRA's sell you

barmstrong

im not falling for any of the 'increase your score for £50' jokes. I've just spoke to Experian, although it's an expensive service theyre quite helpful..