Would someone clarify Minimum Payment query please :)

Slayerx

I've read on here if you pay even £1 more than minimum payment, this looks better to lenders as they can tell if your just paying the minimum each month on credit cards.

I was wondering how much truth there is in this?

Rosco32

This is true. For example when my Tesco credit card account information is reported to Experian there is a minimum payment flag shown. I'm looking at my Tesco card on Experian now and they call this field a "Payment Code". If you only make minimum payments the flag will be marked with a "Y" which indicates the payment made was for the minimum and banks could view this as you only been able to afford the minimum payment. If you pay more than the minimum payment then there is no flag given at all so it appears more than the minimum is been paid. I've never had this on my Tesco card though as I always pay £150 pm and they only ask for approx. £40. Minimum payment, which decreases even further the more I clear the balance.

Slayerx

Most helpful thanks

Rosco32

I tell a lie. If minimum payment is made the payment code will show a "M" for minimum. Just looked at an old MBNA credit card I closed in 2009.

Thrugelmir

Lenders can also compute the rate at which debts are either being accumulated or repaid. So there's a number of angles they can dissect the data.

YorkshireBoy

Slayerx wrote: »

I've read on here if you pay even £1 more than minimum payment, this looks better to lenders as they can tell if your just paying the minimum each month on credit cards.

I was wondering how much truth there is in this?

Can you imagine the work involved in setting this up when it was introduced a couple of years ago?

The banks and the CRAs wouldn't have invested time and money if it wasn't going to be useful to the lenders.

But, as Thrugelmir says, because there's also a running balance month by month they can look at this too.

My opinion (that's all) is that lenders may not be too (or as) concerned by minimum payment markers if they're accompanied by promotional rate indicators. However, remember that not all 'promotional rates' are 0%!

Maestro.

I imagine lenders also look at whether the card is on a promotional rate and whether the balance is actually moving or simply going down. My MBNA card which is currently on a "slow burner" and will be cleared sometime late this year, would show signs of debt stress if it wasn't on 0% and was being spent on - but it's not (I don't even know the PIN), the balance doesn't go anywhere but down exactly by how much I pay each month, but the payment itself is small. If I were paying minimums only I very much doubt it would make much difference at all, especially as I have other accounts that are being cleared in full. An underwriter with any brains will see that and know it's stoozing/rate tarting.