Building credit

Bobbyd67

For a long time I had poor credit due to a CCJ. That dropped off last year. Since then I have tried to rebuild my 'attractiveness' to lenders. My main aim is to buy a house. I have been on the electoral roll for last 2 years. I have closed my 2nd bank account after clearing a £1000 overdraft. I have a Luma (high interest) credit card with a limit of £200. I make small purchases and pay in full each month. I have no problem managing this as i use it for groceries where previously I would have paid cash.

I have a Very Catalogue account with a £250 limit. Not having credit for some time I am extremely cautious about using this account, as it doesn't make sense to me. Everything is about 20% dearer than if I bought items on the high street or direct from other online stores. If I'm trying to improve my credit profile I have to spend more. I find this contradictory.

Are there any other ways to improve your credit profile?

Thanks.

The_Boss

Keep using the Luma card, wait for the 'next' statement and then pay it in full (set up a direct debit to do this, but make sure you make the first payment manually). Over time you'll build up a better history and be able to apply for other cards. How long have you had it and the Very account?

Check your credit reports with Experian, Equifax (both do free one month trials) and Noddle (free forever) but make sure you ignore their "scores" as they mean nothing being randomly generated numbers. Then check and see if there is anything negative on your file - e.g. missed payments, defaults from forgotten accounts etc. Just make sure you cancel Experian and Equifax before the month is up.

Tixy

Really time is the main thing for improving your credit history and your ability to get credit.

I would just keep using the card as you are doing, credit cards are the best free way to demonstrate a responsible use of credit.

Bobbyd67

Thanks boss. I've had the Luma card for 7 months and paid in full every time. However I am doing this manually. Will making it a DD make a difference?

I've had the Very account for 2 months. Didn't use it the 1st month but have the 2nd and paid it in full rather than over the 3 month interest free offer.

I had my credit reports last November which will be very different now. The problem is knowing what lenders are looking for, especially when looking to get on the housing ladder. Plus would I need to maintain my 'good' credit building going for years for it to have a positive impact on applying for a mortgage. I find it a bit perverse as I have been paying rent for almost 5 years on my own. A rent that would be higher than a mortgage but this wouldn't be taken into account. Surely this shows my ability to pay off the credit rather than buying things on an expensive catalogue.

Tixy

Bobbyd67 wrote: »

. However I am doing this manually. Will making it a DD make a difference?

As long as you are paying after the statement is generated each month then it makes no difference whether you pay manually or by DD.

Bobbyd67 wrote: »

The problem is knowing what lenders are looking for, especially when looking to get on the housing ladder. Plus would I need to maintain my 'good' credit building going for years for it to have a positive impact on applying for a mortgage. I find it a bit perverse as I have been paying rent for almost 5 years on my own. A rent that would be higher than a mortgage but this wouldn't be taken into account. Surely this shows my ability to pay off the credit rather than buying things on an expensive catalogue.

For a mortgage lender yes it is far more important to be able to demonstrate an ability to repay, which will be done by a detailed look at your finance/bank statements etc. If you have been paying renting and making regular savings for several years then this will certainly help.

May be worth speaking to a mortgage broker and seeing what they think of your chances of finding a mortgage lender willing to lend to you at the moment (assuming you are ready to buy now).

Bobbyd67

Tixy wrote: »

Really time is the main thing for improving your credit history and your ability to get credit.

I would just keep using the card as you are doing, credit cards are the best free way to demonstrate a responsible use of credit.

With it being a small amount of credit does that matter when my aim is a mortgage in the future?

Would multiple cards help? I've recently been receiving (and ignoring) offers from other cards to apply. I'm sceptical as I don't want to do anything that hinders me building up a strong credit file.

Thanks.

kingstreet

If you want to be really clever, try to ensure you match your card CRA and your mortgage lender's CRA.

For example, Nationwide Building Society takes its mortgage application data from Experian alone. Try to have a credit card which feeds data to Experian, so Nationwide will be able to see it when you apply.

Likewise NatWest takes from Equifax alone, so get a card which feeds to Equifax, so NatWest will see it when you apply.

Skipton is Call Credit etc.

Having a card feeding to Equifax wouldn't help much on a Nationwide mortgage application.