How long should I keep a credit card for?

grandplonker

How long should I keep a credit card for? Long term priority is increasing credit worthiness, at all costs. Increasing my credit limit is secondary. ie I'll do anything I need to now to make mortgages more accessible in three years. I've gained 51 points in a year, for what it means (742-793, see Check My File).

In Feb 2013 I took my first credit card, Aqua £250 limit.
In April 2013, I took a Tesco card at £2,000.
In August 2013 Aqua increased to £1,000.
In Jan 2014 I took a Virgin card at £2,300, and Aqua are cancelling all their cards like mine.
In Apr 2014 I can ask Tesco to increase my limit.

So, I'll have £2,000 on Tesco and £2,300 on Virgin. I also have an overdraft and phone contract; I'm living with parents age 20s. When and what should I do next with my two cards bearing in mind my priorities?

CherlokHomes

Just carry on paying your cards on time it's all you can do really.

One Tip though please cancel your check my file as this is not a CRA and their silly score has no bearing on your credit worthiness just as Experian & Equifax's scores.

StuC75

You need to look at what may be counting against you on credit file..

Are you on the Electoral register?
Are you always living in the Overdraft? can you get this out of the way?..
Are they the credit limits? what balances are you using of these?.. Are you paying these in full each month?...

live within you means and build up a good saving pot is the best way of getting a house..

grandplonker

Doesn't it matter how many cards I have and how long I have them for?

CMF is a great tool. They give separate scores on file for each agency, and EVERYTHING assessed during credit searches. I now know Equifax incorrectly think I'm not on the Electoral Register and I've had the opportunity to action that.

grandplonker

Stu: My overdraft was unilaterally reduced in 2013 £3,400 to £1,900. It's been clear for 18 months. I'm on the Electoral Register and I'm trying to convince Equifax of that. Those are the credit limits on my credit cards and in general less than half the limit has been used.

StuC75

those scores mean very little, since they are not the ones that will be providing you with credit in the long run - they can be a usefull guide, but that's about all..

chopping and changing cards can be unappealing to lenders - if anything a large amount of Available credit can be a bad thing ~ but they can also gauge how well such facilities have been managed upto now..

mortgage lenders place more emphasis on how stable your employment history is, how much you are earning (take home pay) and what you can comfortably afford when any other credit commitments have been met each month -

so if they see a credit history of lots spending on cards, that's say only paid back as a minimum amount - with a mortgage application requesting near to maximum funds then they may well refuse on grounds of affordability...

But if you show as been paying cards in full, plenty of deposit saved, lending a modest LTV % and application form suggests comfortably covering the obligations then you will be a stronger applicant..

How well you can portray the latter will help you buy the house..

so cancel any credit score subscription you have and get saving it...

StuC75

If the OD isn't being used then I would ask for it to be removed, except for maybe some small buffer amount if that's needed?

Do you have any particular mortgage lender in mind for the future? if so look to get banking with them in the meantime (if not already with them) - as that would help you further when they look on you as an existing customer..

grandplonker wrote: »

Stu: My overdraft was unilaterally reduced in 2013 £3,400 to £1,900. It's been clear for 18 months. I'm on the Electoral Register and I'm trying to convince Equifax of that. Those are the credit limits on my credit cards and in general less than half the limit has been used.

grandplonker

Stu the CMF report only says the credit limit, the balance and whether there was a default each month. So long as I've made the minimum payment on a 0% card it doesn't stipulate whether the entire balance was paid off; and Martin's Stoozing article states lenders aren't usually smart enough to figure whether I've been stoozing or not. I think that would be wiser than paying off everything every month.

grandplonker

Advice about the deposit is more than sensible too. The bank don't pay interest, so I only keep the cash there I need for the month and aim to put savings into investment funds.

StuC75

The Experian file shows if there is a promotional in place on the account and if minimum only was paid.. Experian is used by more lenders - so its really not that difficult for them to figure that out.. Pay minimum + £1 and would never have that flag anyway..

Stoozing is a far different pass time than preparing for a mortgage - there are other posts around here of people who have had to explain to under writers there credit card \ savings setup when affordability has been questioned.. so the fact lenders may not figure this out may affect later applications if they are only assessed to a 'computer says no' level..

Its the same with people that have multiple bank accounts to take advantage of cashback deals (eg. Halifax & Santander offers), who transfer around a single balance when paid to satisfy the cashback conditions... Yes its a bit of work and it gives them a payback,, but those same actions can raise underwriters questions when reviewing your bank statements when assessing mortgage applications.. Again other people have posted regarding problems they've had with this..

grandplonker

Right the minimum repayment on my Tesco card is £25.

Are you saying it is better credit file-wise to pay £26?

Edit: About shifting money about for offers - I'm doing that with the Halifax Reward. To get £5 a month, you need to lodge £750 with 2 direct debits collected. I set up a standing order with £200 going in every Monday and out every Thursday. I have a direct debit of £10 to the Credit Union and £1 to my ISA (both minimums). It worked. I'm £5 up each month.