Building credit

itchyextremist

I have a LUMA credit card with a very small limit (£200). My credit is currently terrible so I'm using this in an attempt to build credit, but have a question.


I'm currently making small purchases on it (£5-£10) and then paying it off almost immediately. There is a direct debit setup to pay off the full amount every month.


My question is should I wait for the direct debit to take the money or just pay it off whenever I feel like it. Does waiting for the DD improve credit quicker than just paying it off randomly?

LplateSaver

You need to pay after the statement date (it doesn't matter if by direct debit or not) for the statement balance to be reported to the CRAs. Otherwise your balance will be reported as £0 if you pay before the statement date.

grumbler

Unless you get close to the limit, there is no point in making manual payments. By doing this you can make you card looking like unused in the credit file.

I assume the DD is set for a full payment.

20aday

In addition to the advice posted above you are better waiting to pay your bill after the statement has been generated and before the due date. I used to pay what I'd used the card for straightaway for a long time. I stopped doing that last year and have had a credit limit increase from Lloyds Bank and Argos. Santander gave me their 123 card with a £2,400 limit recently. It takes time to rebuild your credit files but you're taking a step in the right direction.

Anthorn

It's not exactly for no reason that rather a lot of people make a manual payment of the minimum amount even if they have a direct debit applied to pay off the whole balance. Basically, the DD is known to fail either due to the receiving account or the sending account. Either way it will be your fault that payment has not been made or is late unless you can prove different. Better to avoid that situation in the first place.

Let's join the real world: Credit card companies could delay applying a payment to your account until after they have their interest and fees. Whether this is by design or accidental is not clear but there are enough reports about this faiure in these very MSE forums to consider that the failure is by design, especially with certain sub-prime cards and payments made in good time but nevertheless at the last minute: The reason why I personally allow a full 10 working days for a payment to show in my credit card account.

It's your credit and if you don't look after it no-one else will.

[Deleted User]

Anthorn wrote: »

Let's join the real world: Credit card companies could delay applying a payment to your account until after they have their interest and fees. Whether this is by design or accidental is not clear but there are enough reports about this faiure in these very MSE forums to consider that the failure is by design, especially with certain sub-prime cards and payments made in good time but nevertheless at the last minute:

I think in the actual real world, it is the opposite. Customers for some reason leave payments as late as posible and then complain that the lenders have processed payments exactly as they said they would.

Anthorn

Deleted_User wrote: »

I think in the actual real world, it is the opposite. Customers for some reason leave payments as late as posible and then complain that the lenders have processed payments exactly as they said they would.

In the actual real world they make a profit by hook or by crook. Their customers should not hesitate to threaten them with arbitration and then take it to arbitration if the company persists.


Most quote allowing three to five working days for payments to appear in accounts. If it takes 7 working days for example then it's an open and shut case of negligence by the credit card company which should result in refund of all charges for late payment and interest. The get-out of possible delays effectively an open door to abuse just doesn't count.

Shopper_99

Basically, the DD is known to fail either due to the receiving account or the sending account. Either way it will be your fault that payment has not been made or is late unless you can prove different. Better to avoid that situation in the first place.

I've got a number of credit cards and I've never had a problem with direct debit payments. The only time you would need to worry about it failing is if there wasn't enough money in your account to cover it. Something that your credit card lender is hardly to blame for.

While banks do make money on interest the idea that they would delay payments in order to charge extra interest/fees sounds a bit paranoid.

Anthorn

Shopper_99 wrote: »

I've got a number of credit cards and I've never had a problem with direct debit payments. The only time you would need to worry about it failing is if there wasn't enough money in your account to cover it. Something that your credit card lender is hardly to blame for.

While banks do make money on interest the idea that they would delay payments in order to charge extra interest/fees sounds a bit paranoid.

I have. I had a Direct Debit to clear the whole balance on my Vanquis card but then I decided to make a purchase and pay for it over an extended period. So I changed the DD to minimum payment, Vanquis cancelled the original DD and failed to collect the minimum payment per the new DD even though they had the biggest part of the month to apply it. I spotted that on the day it was due and paid it. Result: £12 fee for late payment.


It was however impossible for me to ascertain that the DD payment was to fail until it had actually failed. There was no need to issue a new DD since the original DD could have been changed with my agreement which they already had.


So yes, DDs can and do fail and it's down to us to insure against it with an additional manual payment.