Should we get a credit card?

bananah

Hi,
We (wife and I) have recently come full circle, having gone through a DMP and then sold our house to pay off the debts, we are now finally creeping back into credit-worthiness.

Our Experian reports are now much improved and we're applying for a new mortgage to buy a house again.

My question is, should we take on a credit card to help restore our credit (or even just for practical reasons) or should we steer clear of credit? It feels amazing not to have any debt whatsoever in our lives but I do wonder if a credit card would help.

That said, our credit ratings do seem to be OK, so maybe its just not necessary.

Thanks for any thoughts / advice.

bennyhill_2

It may be useful to have a credit card with a low limit (you can adjust what they offer downwards once the card is open, if you are unsure you fully trust yourself not to splurge).

I believe lenders do view any debt as a negative, but if there's a history of the debt being paid off in full then it shows in a positive light.

I guess it depends on how soon you are looking to take the mortgage out, too many credit checks in too short a time can look bad too.

...oh, well done on getting yourself sorted!

atush

I would get a credit card if you can.

It is a great way to pay for things online and larger items you have the cash for, due to the enhanced consumer protection.

It is also essential should you be able to afford travel abroad- I would never ever travel outside my country of residence w/o one. But of course you should have the cash to pay the balance when it comes due.

One your credit is repaired, I highly suggest cashback credit cards- I have 2 that give 1% cashback on spending. So I put all the stuff I used to pay cash and use my DC for on on it, and get cash back each month.

DandelionPatrol

bananah wrote: »

My question is, should we take on a credit card to help restore our credit (or even just for practical reasons) or should we steer clear of credit? It feels amazing not to have any debt whatsoever in our lives but I do wonder if a credit card would help.

If you can use a credit card and pay it off in full each month, then go ahead. If you are not going to pay it off in full each month, then steer clear.

As for the credit limit, I know the advice here is often to reduce limits, but I tend to think that a limit being reduced looks bad to a credit underwriter. If the lender reduces it, they must have doubts about your creditworthiness. If you reduce it, you have doubts about your own behaviour and your ability to discipline yourself.

If you have a credit card it is not the lenders job to impose discipline on you, it is your job to set your own limit.

andyfromotley

If you can guarantee that you will use it and pay it off in full with iron discipline then yes.

But if credit cards were part of your previous problems and you think theres even the tiniest chance that you wont do this then no.

The upside for you is small, the potential downside is enormous.

rockm87

Your credit score can be enhanced by other means. You see that paying your fuel bill and/or phone bill and utilities on time will all show on your credit account.

I wouldnt bother with a credit card, especially if you have already been in trouble with debt.