Using a credit card..

TheDebtinator

I know how to use one lol, but, in terms of building a positive history, is it best to use no more than 50% of the available credit when paying it in full each month?

The_Prince

It really doesn't matter if you intend to pay in full each month.


Some people will use 95% of their limit when making a large purchase and want the security that using a credit card can give.


It certainly won't have a negative impact on your credit file unless you spend more than you have available or fail to pay the money back on time.

CLAPTON

TheDebtinator wrote: »

I know how to use one lol, but, in terms of building a positive history, is it best to use no more than 50% of the available credit when paying it in full each month?

best to leave a generous gap so stop you accidentally going over your limit.

Ebe_Scrooge

It doesn't really matter, except to say that it's wise to leave a bit of a gap ( say, use 90% or 95% of it ). Otherwise there's a slight chance that you put, say, 99% of your limit on the card in a month, then when the interest is added on it puts you over your limit.

Obviously, if you're religiously paying in full every month then this won't be an issue, as you won't have any interest to pay. But it's worth bearing in mind. For instance, for an occasional large purchase, it can be a cheap way of borrowing money for just 1 or 2 months - where you buy the item and PLAN to pay it off over, say, 2 months. The key word there being "plan" - you really must be disciplined, and if it's a planned strategy then I don't think it's an issue. Where it does become an issue is when you regularly carry a balance simply because you can't afford to pay the full balance. Yes, you could argue - and very reasonably so - that if you can afford to pay it off in 2 months you really ought to save for 2 months instead. But there are certain circumstances where this can be helpful - I don't know, maybe the washing machine dies completely, you have a large family, there's no laundrette within 20 miles, and you can afford to buy a new machine over 2 months but not all at once. Hypothetical situation, but reasonable.

Anyway, I digress The bottom line is, use as much credit as you want, as long as you pay in full every month there'll be no issue, and it'll improve your credit history.

TheDebtinator

Thanks guys. Limit is £300 and I am setting up a DD to pay the balance each month, just wanted to make sure. Its only being used for work fuel expenses to keep it separate from my other card.

Doctor_Duke

One day you could perhaps consider a cashback card although they have a fee you might gain if you use that much in fuel. Santander 123 or AA are two that come to mind, Natwest is another.

Ben8282

I would suggest that it would be preferable not to use too great a proportion of this low credit limit. If you can keep it down to less than 50% then it would be better to do so. Not essential but better.

TheDebtinator

Doctor_Duke wrote: »

One day you could perhaps consider a cashback card although they have a fee you might gain if you use that much in fuel. Santander 123 or AA are two that come to mind, Natwest is another.

That would be nice if I was eligible, but my credit rating is tanked

Ben8282 wrote: »

I would suggest that it would be preferable not to use too great a proportion of this low credit limit. If you can keep it down to less than 50% then it would be better to do so. Not essential but better.

Thanks Ben, so that would be around 3 fills ups then, about 2 weeks worth at the moment hahaha.

Doctor_Duke

TheDebtinator wrote: »

That would be nice if I was eligible, but my credit rating is tanked

Is your Credit File tanked rather than your rating which actually means nothing to lenders? You could do a eligibility checker with Natwest Rewards. They give you an indication of success without placing a hard search on your credit file.

Ebe_Scrooge

Ben8282 wrote: »

I would suggest that it would be preferable not to use too great a proportion of this low credit limit. If you can keep it down to less than 50% then it would be better to do so. Not essential but better.

Why ? Not necessarily disagreeing with you you, just curious as to your reasoning ?

redpete

Doctor_Duke wrote: »

Is your Credit File tanked rather than your rating which actually means nothing to lenders? You could do a eligibility checker with Natwest Rewards. They give you an indication of success without placing a hard search on your credit file.

I keep seeing people write that a credit rating number is meaningless - not true. The number itself is not used by the lenders but the information from a CRA is.

The information used by a CRA to work out the number is part of the information a lender will use when they are working our the risk/benefit of you as a customer. If this information is sufficient for a CRA to give you a 'bad' number then there is a strong chance that a lender will also have a negative view of you as a borrower.

What is true is that a lender will use additional information (e.g. your income) and will weight different criteria differently to the CRA so a 'good' credit rating number is no guarantee that a lender will welcome you with open arms.