credit cards and impact on credit score

u0362565

Hi all,

I've heard a rumour that if you regularly use a substantial proportion of credit on a credit card even if you pay it off in full each month this could have a negative impact on your credit score, is that correct?

I probably use up to 50% of my credit limit each month but always pay it off in full. Would it be beneficial to be paying the credit back during the month to prevent having too much utilisation i think its called. So use 10% pay it off, let 10% build again, pay it off etc.

The whole point of getting a credit card was to help improve my credit score so its not great if i'm using it in a negative way. I don't really understand the problem in the first place, if you use the credit but pay it off doesn't that suggest you're "safe" bet as far as lenders are concerned, even though they don't see your credit score.

Thanks

DCFC79

u0362565 wrote: »

Hi all,

I've heard a rumour that if you regularly use a substantial proportion of credit on a credit card even if you pay it off in full each month this could have a negative impact on your credit score, is that correct?

I probably use up to 50% of my credit limit each month but always pay it off in full. Would it be beneficial to be paying the credit back during the month to prevent having too much utilisation i think its called. So use 10% pay it off, let 10% build again, pay it off etc.

The whole point of getting a credit card was to help improve my credit score so its not great if i'm using it in a negative way. I don't really understand the problem in the first place, if you use the credit but pay it off doesn't that suggest you're "safe" bet as far as lenders are concerned, even though they don't see your credit score.

Thanks

Whatever the effect it in no way [STRIKE]matters[/STRIKE] affects [STRIKE]about[/STRIKE] your credit score, lenders don't see it hence its useless.

u0362565

so if it doesn't matter, why does it exist? And why should it matter to me?

DCFC79

u0362565 wrote: »

so if it doesn't matter, why does it exist? And why should it matter to me?

Its just a figure the reference agencies use, noddle will score you out of 5 and Experian will score you from 1 and 999.

I meant it in no way affects your credit score, what matters is whats on your history which is what lenders see.

u0362565

So really its a way for reference agencies to be able to indicate to you the health of your credit rating through a single number?

I think i might sign up for one of these agencies and just see how i'm doing, i haven't looked at it for several years.

Thanks

David301

Lenders will see what you earn, they will then look at your outstanding debt, they will look to see if you are a late payer, look to see if your credit creeps up each month etc

If you want to look "good" use your credit card, dont let it mount up, clear it off each month so you don't pay interest and cost yourself money for the sake of looking "good"

imagine you were the lender, what would you want from someone if they asked you for money?

Nasqueron

u0362565 wrote: »

So really its a way for reference agencies to be able to indicate to you the health of your credit rating through a single number?

I think i might sign up for one of these agencies and just see how i'm doing, i haven't looked at it for several years.

Thanks

How a credit agency rates you is meaningless as they do not lend you money - all a lender cares about is your record - do you pay off CC in full, can you borrow money and pay it back, will your salary mean you are at risk of not being able to pay it back etc.

What the agency considers "healthy" is rather more connected to selling you "improvement" services that increase only their score of you which lenders do not see - there are examples of people at or close to 999 with Experian who have defaults on their judgement, 999/999 suggests perfect history and every lender would consider them for their best deals, a default will rule that out proving the score is moot.

MisterBaxter

David301 wrote: »

Lenders will see what you earn, they will then look at your outstanding debt, they will look to see if you are a late payer, look to see if your credit creeps up each month etc

If you want to look "good" use your credit card, dont let it mount up, clear it off each month so you don't pay interest and cost yourself money for the sake of looking "good"

imagine you were the lender, what would you want from someone if they asked you for money?

If I were a CC lender then I would most likely want someone who carried at least some balance each month as that is where the profit is. If I were lending on a standard loan or finance agreement then I'd want someone who paid on time.

A lenders view on your credit profile is almost certainly going to depend to some degree on the type of credit you are looking to obtain. Obviously having no defaults, late payments etc is likely to make you look more attractive no matter the type of lending but even that isn't clear cut when you get to the sub-prime market.

Bottom line seems to be don't worry about the score the CRA gives you but do check to make sure the data they hold on you is correct and stay on top of your finances.

u0362565

Thanks guys, it does make sense to try and think like a lender which to me means someone I can lend to and always get the money back on time. The only caveat to that as has been mentioned is with credit cards because it would seem logical that the bank would want you to hold some of the balance so they are actually making some money from you..

Thanks

CLAPTON

u0362565 wrote: »

Thanks guys, it does make sense to try and think like a lender which to me means someone I can lend to and always get the money back on time. The only caveat to that as has been mentioned is with credit cards because it would seem logical that the bank would want you to hold some of the balance so they are actually making some money from you..

Thanks

that is a myth and isn't logical

CC make money every time you spend as they get a percentage from the merchant
mostly they want people who NEVER default as any default wipes out the profit from many people.

it's true that some CC target higher risk people and charge very high APRs

about 50% of us never pay any interest as we pay in full .
we can typically get any card we apply for as we are seen as an excellent risk


don't throw away money or make it appear you can't afford to clear your debt, on a speculation on an internet web site.

MABLE

My feeling is if you have lots of credit cards and have had them for a number
of years and have used them in a sensible manner then this will go in your favour. We have about 10 and have never caused us a problem in getting further credit.

About a month ago we were granted a loan from NW at their lowest int rate of 3.6 percent but decided in the end to use our savings.