Getting a Credit Card to improve my Credit Score

bjwood

I've never had a Credit Card in my life. I've heard that using a Credit Card (and keeping up to date with paying it off) that improve your credit score. I've also heard that the credit score you have in meaningless.

Which is true?

Does it make any financial sense to get a Credit Card now (I'm in my thirties)? Would an improved Credit Score (if they are of any value) help with the kind of mortgage I could get?

mcpitman

Afternoon, credit scores do exist, but don't mean anything to anyone except yourself (they aren't displayed to lenders).

Your credit "worthiness" is based on many different principles, and some of this data (payment history, balances outstanding etc) are shared by the Credit rating agencies.

Lenders also take into account (for martages and most products) salary/income, number of dependants etc etc.

Mortgage wise, it's not that you won't get a mortgage, it's just that you would be able to display that you can manage debt and the payments required to manage that debt.

If you do not need to borrow money on a credit card, just use it for fuel/food shopping and pay off in full every month. This will avoid any interest charges and show a good payment record.

bjwood

Thanks for the info.

Your last point is what people seem to recommend. One of my aims is to keep my financial life as simple as possible. My current aim is to keep my mortgage payments as low as possible (who wouldn't want that!) and I've been looking at my credit score to see if that helps.

I guess I'll need to figure out if the slight admin burden of a credit card improves my credit score enough to give me access to better rates when I remortgage.

I guess there's only one real way to find out!

HLR93

Hi,

When i went for a meeting with a mortgage advisor, i asked them myself if getting a credit card would help my credit score as i'd been told that it could. The gentleman said it doesn't at all, even if you pay it off it's meaningless.

Hope this helps.

mcpitman

I guess I'll need to figure out if the slight admin burden of a credit card improves my credit score enough to give me access to better rates when I remortgage.

True, however get a cashback credit card when you can and the credit card provider will give you a certain % (1-3%) cashback on all of your purchases, so everything costs you 1-3% less in the longrun!

FireWyrm

Mortgage lenders have their own criterion by which they decide if you are credit worthy and how much to lend to you. A commercial credit rating is irrelevant for that purpose other than to show you are alive. If you dont have a credit score, they will underwrite the old fashioned way, with paperwork. In reality, since the advent of the MMR anyway, they have to do this again when over the last decade they stopped doing it, and look where it got them. They used to lend anything to anyone with a pulse.

Your credit record is only relevant if you intend to borrow commercially, ie for a car or something like that. Mortgages are an entirely different animal and require much more information and evidence than a silly score which is made up anyway.

FireWyrm

mcpitman wrote: »

True, however get a cashback credit card when you can and the credit card provider will give you a certain % (1-3%) cashback on all of your purchases, so everything costs you 1-3% less in the longrun!

You really have to read the fine print to have a snowballs chance in hell of actually getting that cashback. There are so many exclusions and caveats it's almost useless. The effort far outweighs the rewards.

Luke

bjwood wrote: »

to give me access to better rates when I remortgage.

The best mortgage rates are for those with a fair amount of equity in their home (60% loan to value) nothing to do with there credit worthiness.

bjwood

Thanks for all the info everyone. A few things to consider but my instinct (and natural laziness) is telling me to remain credit card free and proud!

SuperHan

FireWyrm wrote: »

You really have to read the fine print to have a snowballs chance in hell of actually getting that cashback. There are so many exclusions and caveats it's almost useless. The effort far outweighs the rewards.

Really? I got a Santander 123 card. I put all my petrol on it. I get cash back credited to my statements every month. No caveats.

I also have an Amazon card (which granted is about to end, but the point stands). I put everything else on it. Every £1,000 I spend I get a £10 amazon voucher back.

No effort required on either card, other than the initial application, getting it out of my purse and (sometimes) entering the PIN.

mcpitman

SuperHan wrote: »

Really? I got a Santander 123 card. I put all my petrol on it. I get cash back credited to my statements every month. No caveats.

I also have an Amazon card (which granted is about to end, but the point stands). I put everything else on it. Every £1,000 I spend I get a £10 amazon voucher back.

No effort required on either card, other than the initial application, getting it out of my purse and (sometimes) entering the PIN.

Completely agree with the above.

Casback couldn't be simpler on my current Cashback CC provider (Barclaycard).

Through fuel purchases last year, this scheme provided me in excess of £200 cashback, for free!