Is this even legal?

3mustgetbeers

Hi all, first time poster so go easy...

My girlfriend and I recently failed a credit check for a mortgage despite walking in with £10k (10%) and backed by a £60k joint income with the knowledge that the repayments would be 30% less than our current rent :shocked:

I guess the reason for this being that we have never actually had credit (except our telephony contracts - paid in full on time). No credit cards/store cards/loans etc. Debit & cash all the way. I have just always operated on the policy "if you don't have it, don't spend it" since my student days. But after reading a fair bit over these forums I have bitten the bullet and got a credit card to start building a history.

What I'm interested in is a scheme to 'catalyse' the rate at which we can build our credit rating over the next 18 months. From what I understand, spending to your limit on a credit card, then repaying every penny by the due date is the best way to achieve this, right? So with that in mind, would the following series of transactions be legal & above board:

- My girlfriend is selling something on ebay (for example) at the same price as the limit on the card
- I buy it on the card
- I go to pick up my goods but they are not satisfactory so I demand a refund
- The refund is given there and then in cash, which I use to go pay off the card...

Now to me it sounds like a great plan to make money (cash back), save money (it's never truly spent) and build a credit rating. There is surely no tax issue; my partner sells only to me and refunds every last penny - there are no sales at all...

So is that dodgy? I know it certainly sounds it, so it must be? Then again, if there is one thing I have learned in the past couple of months looking properly at MSE, its that credit cards are, to an extent, a game. Perhaps this is just another move in the game?

Andy

sharp910sh

3mustgetbeers wrote: »

Hi all, first time poster so go easy...

My girlfriend and I recently failed a credit check for a mortgage despite walking in with £10k (10%) and backed by a £60k joint income with the knowledge that the repayments would be 30% less than our current rent :shocked:

I guess the reason for this being that we have never actually had credit (except our telephony contracts - paid in full on time). No credit cards/store cards/loans etc. Debit & cash all the way. I have just always operated on the policy "if you don't have it, don't spend it" since my student days. But after reading a fair bit over these forums I have bitten the bullet and got a credit card to start building a history.

What I'm interested in is a scheme to 'catalyse' the rate at which we can build our credit rating over the next 18 months. From what I understand, spending to your limit on a credit card, then repaying every penny by the due date is the best way to achieve this, right? So with that in mind, would the following series of transactions be legal & above board:

- My girlfriend is selling something on ebay (for example) at the same price as the limit on the card
- I buy it on the card
- I go to pick up my goods but they are not satisfactory so I demand a refund
- The refund is given there and then in cash, which I use to go pay off the card...

Now to me it sounds like a great plan to make money (cash back), save money (it's never truly spent) and build a credit rating. There is surely no tax issue; my partner sells only to me and refunds every last penny - there are no sales at all...

So is that dodgy? I know it certainly sounds it, so it must be? Then again, if there is one thing I have learned in the past couple of months looking properly at MSE, its that credit cards are, to an extent, a game. Perhaps this is just another move in the game?

Andy

That won't work. If you buy something on ebay with your credit card via paypal the money is refunded back to your card via paypal directly. You won't see any of it in cash. Therefore, this will not help you.

I think you need to realise that using a credit card is not a problem. just use your credit card for everyday spending, then pay back the amount when the bill is due. No problem then, no interest or anything. You don't need to play weird trick, just use the card as if it was a debit card and pay it back to built up your credit rating. Also start increasing your deposit to 20%, as 10% is not much.

Make sure both of you have credit card too and use it regularly.

3mustgetbeers

Cheers!

The idea was to maximise on the benefits of having a credit card. Every day spending would see me reap the benefits, but not maximise them.

For instance, every day spending across a month would be ~£750. The limit is £2000. Obviously x% cash back on £2k is much better that x% cash back on £750. But how about credit rating? If you are meeting payments of £2k regularly does that look better than meeting payments of £750 (even if both figures are 100% of the balance) - or is it simply "paid off balance = tick on file"??

It isn't a trick, though I think my example makes it look a little more cloak and dagger. The same concept could be applied to the following; you go to your local corner shop & buy a chocolate bar with your card... and get £1000 cash back from the cashier. This £1000 in cash is taken to the bank to pay off the card.

Purchase is now £1001 rather than just £1, so the rewards from the card proves much more lucrative than simply using day to day - or do I have this all wrong?

EDIT: And if my thinking is right, would doing this across multiple cards be feasible (assuming you keep all plates spinning!)

Cheers!

sharp910sh

3mustgetbeers wrote: »

Cheers!

The idea was to maximise on the benefits of having a credit card. Every day spending would see me reap the benefits, but not maximise them.

For instance, every day spending across a month would be ~£750. The limit is £2000. Obviously x% cash back on £2k is much better that x% cash back on £750. But how about credit rating? If you are meeting payments of £2k regularly does that look better than meeting payments of £750 (even if both figures are 100% of the balance) - or is it simply "paid off balance = tick on file"??

It isn't a trick, though I think my example makes it look a little more cloak and dagger. The same concept could be applied to the following; you go to your local corner shop & buy a chocolate bar with your card... and get £1000 cash back from the cashier. This £1000 in cash is taken to the bank to pay off the card.

Purchase is now £1001 rather than just £1, so the rewards from the card proves much more lucrative than simply using day to day - or do I have this all wrong?

EDIT: And if my thinking is right, would doing this across multiple cards be feasible (assuming you keep all plates spinning!)

Cheers!

I wouldn't try any tricks my friend. No need to do any of that. Just use your credit card as a debit card, but do not take cash out as interest will be charged from day one. Just use your card, if its only £750 you spend a month. Thats fine. Use it regularly for between 6 months to a year. This will show you can handle credit and pay of the balance.

mjm3346

and get £1000 cash back from the cashier. This £1000 in cash is taken to the bank to pay off the card.

Purchase is now £1001 rather than just £1, so the rewards from the card proves much more lucrative than simply using day to day - or do I have this all wrong

Cashback limit is much lower than that and you can usually only get cashback on a debit card not a credit card.

inmypocketnottheirs

Don't use a credit card to withdraw cash. You will be charged interest from the day of withdrawal as well as a fee. This is also reported on your credit file and cash withdrawals on a credit card are seen as signs of overspending.

The_Boss

If you don't want to be tempted then just spend a couple of quid and repay in full by direct debit. No interest and you build a history.

Ideal if you and the Mrs get 2-3 cards each as means more data on your file and therefore more of a track record. Look to apply for a Vanquis card snd then another after 6 months. If you both have a mobile phone contract then that should also be showing

shortcrust

Just to support what others are saying, all you need to use your card for is the shopping that you would buy anyway. I can't see any benefit is trying to engineer a higher spend. Good luck when you reapply!:)

ValHaller

3mustgetbeers wrote: »

- My girlfriend is selling something on ebay (for example) at the same price as the limit on the card
- I buy it on the card
- I go to pick up my goods but they are not satisfactory so I demand a refund
- The refund is given there and then in cash, which I use to go pay off the card...

Never mind the refund, just sell it back to her. You don't even have to have the goods. Sell London Bridge to her - give an IOU for London Bridge. Buy the Titanic from her for the same amount and accept an IOU from her for the Titanic. Cancel debts to each other at the end of the month by swapping IOUs back.

More seriously I suggest you don't play games to up your so-called credit-score. Now you have the cards, just use them for day to day expenditure - petrol, food etc and pay them back in full at the end of the month. Don't leave a balance on the cards in the belief thta the borrowing will help you. It may help you for sofa credit, but it will be somewhat detrimental for mortgage credit.

Probably part of your problem is that you don't show up enough on the credit record for the mortgage lenders to be happy that you are real people rather than any fundamental issue with your financial behaviour. You need 3 years of address history plus being on the electoral roll. I would think that if your addresses over the last 3 years are already supported by the electoral roll, then it could be straightforward to get the credit records updated and your mortgage prospects would be improved.

I suggest too that you visit the mortgages and endowments forum for your problem as the people there have more specialist knowledge on mortgage lenders' preferences.

matty747

Have you tried applying for a mortgage from your own bank which would have a much better idea of your financial position as they will be able to see your account conduct?

If you do get a credit card use it for day to day spending then pay it off in full every month. Never spend more than 50% of your limit and pay on time, that will increase your score. Manufacturing spend could cause security and anti money laundering checks.

You should seek specialist mortgage advice as simply not having a credit card shouldn't be a reason to turn you down for a mortgage.

_Andy_

"Have you tried applying for a mortgage from your own bank which would have a much better idea of your financial position as they will be able to see your account conduct?"

Won't affect things. Any lender can just ask to see statements anyway. Banking with X lender isn't going to get around any lending criteria issues.