Credit rating journey - having trouble reading the map

Megano

Couple of questions which I hope folk can help me with.
I've recently cleared off my credit card which has a limit of £1050 now I read the best way to improve your score is to use it for small purchases and then pay off the balance in full every month (which is currently the plan) however I also read the best way to improve your score quicker every month is to use 40% of the credit limit so should I reduce this to maybe £100?
Also I have 2250 in an overdraft which is my next thing to bust however I read I shouldn't clear it in bits and pieces as that can have a massive impact. (why is this credit rating thing easier!) So should I pay off £250 per month (once a month) or save up and pay the whole thing off at one time?

glentoran99

Megano wrote: »

Couple of questions which I hope folk can help me with.
I've recently cleared off my credit card which has a limit of £1050 now I read the best way to improve your score is to use it for small purchases and then pay off the balance in full every month (which is currently the plan) however I also read the best way to improve your score quicker every month is to use 40% of the credit limit so should I reduce this to maybe £100?
Also I have 2250 in an overdraft which is my next thing to bust however I read I shouldn't clear it in bits and pieces as that can have a massive impact. (why is this credit rating thing easier!) So should I pay off £250 per month (once a month) or save up and pay the whole thing off at one time?

Don't get hung up on "credit rating" use and pay off credit in full, ignore this 40% thing its nonsense, and pay off your overdraft as you can, why in the world would it look better to be using a full overdraft every month until you have saved enough to pay it off,


Credit scores are a made up number with no relevance in the real world

Thrugelmir

To improve your credit rating act normally. Forget all the nonsense. Use a credit card for purchases and settle it every month. Use an overdraft facility as little as possible, i.e. just a temporary back up. For major items of expenditure obtain a loan and repay the money in an affordable time frame.

If you are hoping to obtain a mortgage learn to save on a regular basis. From this you'll learn financial discipline.

27col

Thrugelmir wrote: »

To improve your credit rating act normally. Forget all the nonsense. Use a credit card for purchases and settle it every month. Use an overdraft facility as little as possible, i.e. just a temporary back up. For major items of expenditure obtain a loan and repay the money in an affordable time frame.

If you are hoping to obtain a mortgage learn to save on a regular basis. From this you'll learn financial discipline.

Not much financial discipline evident at times, on this forum I'm afraid.

Megano

I've been in my overdraft for about 3 years after my dad passed away and a loan wasn't available. Long story but to shorten it down 18 + boyfriend who I thought loved me used me as a cash cow. So I paid all the bills bought everything what he did im not to sure so I defaulted on a credit card. However with the overdraft it's reducing slowly it's went from £3000 to £2250 and going to get it cleared this year

glentoran99

27col wrote: »

Not much financial discipline evident at times, on this forum I'm afraid.

Watch you don't fall off that high horse

Ben8282

Firstly, WHY do you want to improve your credit score? What do you want to achieve? What are you planning to apply for?.
Do NOT under any circumstances reduce the credit limit on your credit card to £100. In fact, do not reduce it at all.
You speak of reducing your credit limit to £100 in order to use 40% of your credit limit each month. Can you not manage to put more than £40 of purchases through your card?
I assume your overdraft is on the current account that your income is paid into? Start using the credit card for purchases putting the maximum amount of purchases through the card. Leave the money in your account allowing the overdraft amount to drop more during the course of each month. Obviously repay the credit card in full each month. By maintaining your current credit limit you will be able to put £420 of purchases a month through the card and still keep to your suggested 40% limit.

Superscrooge

Megano wrote: »

Couple of questions which I hope folk can help me with.
I've recently cleared off my credit card which has a limit of £1050 now I read the best way to improve your score is to use it for small purchases and then pay off the balance in full every month (which is currently the plan) however I also read the best way to improve your score quicker every month is to use 40% of the credit limit so should I reduce this to maybe £100?
Also I have 2250 in an overdraft which is my next thing to bust however I read I shouldn't clear it in bits and pieces as that can have a massive impact. (why is this credit rating thing easier!) So should I pay off £250 per month (once a month) or save up and pay the whole thing off at one time?

You seem to be overcomplicating things!

Just use your credit card each month, never missing a payment or exceeding your credit limit. Set up a DD to pay the balance in full each month.

Pay off as much of your overdraft as you can each month.

Credit providers will then see that you can use credit responsibly.

Megano

Ben8282 wrote: »

Firstly, WHY do you want to improve your credit score? What do you want to achieve? What are you planning to apply for?.

I assume your overdraft is on the current account that your income is paid into? Start using the credit card for purchases putting the maximum amount of purchases through the card. Leave the money in your account allowing the overdraft amount to drop more during the course of each month. Obviously repay the credit card in full each month. By maintaining your current credit limit you will be able to put £420 of purchases a month through the card and still keep to your suggested 40% limit.

Im looking to improve my credit score so my OH and I can start saving and apply for a decent mortgage.
In terms of the overdraft its in my lloyds account and currently only my extra income get paid into that (so my lloyds account is my everyday spending account). Everything else gets paid into my santander account (where all the bills come from) and its just a case of transferring what is required.

[Deleted User]

I'm confused with what you're trying to do. As others have said forget the 'credit score' what is important is paying as little as you can.

Are you paying for this Lloyds overdraft, or do you have an interest & fee free amount?

In your signatures are the figures you owe in red for overdraft? If so - DON'T save up in one account THEN transfer it to another account to pay it off, pay all your excess money into the Lloyds account (to reduce the daily overdraft charge).

That will reduce the charges payable. As and when you need money, take more from the overdraft again.

Staying completely overdrawn until you save the money to pay it all off will look worse (and more importantly, cost you more).

E.g.

Santander - Salary in: £1,500
Bills @ Santander = £500.

Move say £800 into the Lloyds account to reduce what you owe on the overdraft. Continue spending using the £200 remaining in Santander (don't run it too close to zero or you'll get charges there).

IF you are close to running out of money in the Santander account, move some back over from Lloyds to Santander (since you now have had that £800 in Lloyds for a few days/weeks, reducing the costs for you).

Remember - your charges for the overdraft are calculated every single day. Even if you have just one day at £1,500 rather than £2,250, that's saving you interest for that day. Money you could then be putting towards paying the overdraft off, and saving for your mortgage.

Whatever you do, do not leave the money sat in Santander or a savings account while you wait for it to build up!



See: http://www.moneysavingexpert.com/savings/pay-off-debts

Megano

Somerset_La_La_La wrote: »

I'm confused with what you're trying to do. As others have said forget the 'credit score' what is important is paying as little as you can.

Are you paying for this Lloyds overdraft, or do you have an interest & fee free amount?

Lloyds don't charge a daily fee its a monthly charge of £6 regardless if your in it for 1 day or 30 plus interest which is 1.53% per month.


The plan was to have a bits and bobs savings account (since Lloyds only allow you to reduce your overdraft by increments of £10) and "round down" my current accounts and then make a large reduction once a month, once I have received my wages from W1, W2 and other instead of making a payment of £10 here and £20 there like I was doing with the credit card.