Credit Score confusion

Kirbi44

I had a 'good' credit score on Experian which had 2 negative points one was due to a defaulted account in 2011 (this will clear next November), the other one was because my Dorothy Perkins account had a £250 limit but I had paid every month and hadnt used for a long time. I closed it thinking it would bump my score up as it was saying the £250 was a low limit to have but it made my score go down!

On my report it said I had a decreased score due 2 changes 1. 'You no longer have any actie revolving credit accounts. As these had low credit limits, this has had a positive effect on your Experian credit score'..... 2. 'You no longer have any active revolving credit accounts and as a result your credit utilisation has changed. This has had a negative effect on your score' What does this mean?!

I only owe a little on my Next account (£3600 limit, £300 owed) and my phone contract (£180) but that is it.

Is my score low because I dont have a loan or a credit card? How can I improve my score? I'm on the electoral role and am not linked to anyone, no past CCJ's, unpaid bills etc.

Any input/advice greatly appreciated.

Ebe_Scrooge

Kirbi44 wrote: »

'You no longer have any actie revolving credit accounts.

Basically, prospective new lenders like to see that you are managing your existing credit sensibly. So having a line of credit, using it regularly and paying it off on time every month is a good thing - they can see that you're good at managing your money.


To increase your credit-worthiness ( the fictitious "score" is meaningless, it's your credit history that counts ), the simplest way is get a credit card. Use it for your everyday spending ( shopping, petrol etc. ) and make absolutely sure that you pay it off in full every month without fail ( set up a DD to avoid the danger of forgetting a payment ). Over time this will reflect well on your credit history.


With little existing history you may need to look at one of the "sub-prime" cards which charge very high interest rates, but as you'll be paying in full every month that's not an issue.

ashp_2

The score drop from closing the account will more than likely only be temporary. Don't read into your "score" too much.

How many credit accounts do you have? If you don't have much history it's worth having a credit card just to build some history. This will also improve your rating.

Kirbi44

I have had store cards in the past and still have my Next account that I pay every month and my phone contract. I havent and will not spend anything on my Next account until I have paid the £300 off so its not like I'm using lots of my limit.

I thought about getting a credit card but because of my 'score' I am only eligible for cards like Aqua which ar high interest but if I spend say £100 on it a month and pay in full - will that make me look more attractive to lenders in the future? How long will it take before my score goes up?

I had a Capital One credit card back in 2006 and closed it recently with a £250 limit but I never even used it. I have never had a loan either.

Thanks again

Ebe_Scrooge

Kirbi44 wrote: »

I thought about getting a credit card but because of my 'score' I am only eligible for cards like Aqua which ar high interest but if I spend say £100 on it a month and pay in full - will that make me look more attractive to lenders in the future? How long will it take before my score goes up?

Yes, this will improve your rating. As I said earlier, the high interest rate is irrelevant - so long as you pay in full every month you won't incur any interest.


It's hard to say how long before your rating starts to improve (different lenders have different criteria), but as a ballpark figure you should start to be in better shape after 6 months to a year.

CalumHeath

Kirbi44 wrote: »

... because of my 'score' I am only eligible for cards like Aqua which ar high interest ...

No. Lenders make decisions based on your credit history.

You've got to get over your score - nobody sees it other than Experian and you. Lenders do not makes decisions based on a number Experian have provided you, they use the tangible information that describes your credit history and make their own decisions.