Direct Debits & Credit Scores

nebulag

Hi,

I have a few questions I was hoping some of you could help me with. I am 27 and sorting out my financial act. I have a credit rating of about 550 which is pretty poor but I am taking steps to try and rebuild my credit. I have now got myself debt free (minus student loan) and I want to sort out my credit rating for when I want a mortgage 2 years down the line.

I have just recently gotten mu first 'real' job or career and now earn enough to live a decent and consistent life and can now save money and sort out my credit score.


1. Does paying a standing order to yourself improve your credit rating? By this I have 2 current accounts. Wages paid in to one and bills from the other. I have set up a standing order to send money from wages account to bill account. (both with different banks).

2. Does it equate to - the more direct debits the better your credit score? or is there a certain cut off point where it doesn't matter how many direct debits you have on your account?

3, Do the values of direct debits effect your credit rating? for example is a £50 direct debit better for your credit rating than a £6 direct debit?

4. Does this have an effect on your credit report?

5x £10 direct debits or 1 £50 direct debit

cheers

[Deleted User]

Payment method is irrelevant. Paying on time and in accordance with t&cs is all that matters.

Ben8282

Why do you have your wages paid into one bank and pay all your bills from a different bank? Sounds pretty pointless and a recipe for errors and bounced payments ....
The number of direct debits in existence will not in any way affect your credit worthiness.

lufc7

Ben8282 wrote: »

Why do you have your wages paid into one bank and pay all your bills from a different bank? Sounds pretty pointless and a recipe for errors and bounced payments ....
The number of direct debits in existence will not in any way affect your credit worthiness.

I would say the opposite having a bills account is great for budgeting and it's also good practice to have more than one account for various scenarios, block cards systems going down etc.
But back onto the OP as long as the accounts aren't in a unauthorised overdraft (more ideally not using any overdraft especially nearer application time) how you use your accounts won't affect your score. DD will only entitle you to certain account benefits from various lenders, halifax reward account for example. Others it will not matter how many, if any at all.
Hope this helps.

boo_star

lufc7 wrote: »

I would say the opposite having a bills account is great for budgeting and it's also good practice to have more than one account for various scenarios, block cards systems going down etc.

Having a bills account is fine but you should have your salary paid into that, transferring money for day-to-day expenditure into a different account, not the other way around.

You mention problems with systems going down, what if the systems at the bank receiving the salary go down? If that's also the bill paying account at least you have an avenue for compensation, and companies would likely be able to see that you bank with "x" and that "x" is having issues and be more understanding.

lufc7

boo_star wrote: »

Having a bills account is fine but you should have your salary paid into that, transferring money for day-to-day expenditure into a different account, not the other way around.

You mention problems with systems going down, what if the systems at the bank receiving the salary go down? If that's also the bill paying account at least you have an avenue for compensation, and companies would likely be able to see that you bank with "x" and that "x" is having issues and be more understanding.

While I agree it's a more practical way having your wages paid into the same account then move it, most problems will be mitigated if you have a sufficient float in the bills account to cover any issues you described

Dan83

Get yourself a credit card, spend on it, then pay it off in full on time.

mwarby

None of your numbered points would affect your credit file with the three CRAs.

A longstanding record of regular payments to others(standing orders or direct debits) which don't bounce or take you overlimit, may improve your behavior score at your bank.

This score is one you will rarely if ever see, but in conjunction with data from CRAs is used to score you at the bank(your bank). Improving this may allow you access to the banks range of credit cards\loans\overdraft and improve the rate, compared to what they could offer you on scoring with CRA data alone

CLAPTON

get copies of your credit reports and see what is actually reported there

in general you want to show
-on the electoral roll
-that you have credit (i.e. credit cards) and pay without fail
-sometime utility bills show as they are credit a/cs

so DD, standing orders what you send is totally irrelevant

so get a couple of CCs , use them and pay in full and on time

HappyMJ

nebulag wrote: »

Hi,

I have a few questions I was hoping some of you could help me with. I am 27 and sorting out my financial act. I have a credit rating of about 550 which is pretty poor but I am taking steps to try and rebuild my credit. I have now got myself debt free (minus student loan) and I want to sort out my credit rating for when I want a mortgage 2 years down the line.

I have just recently gotten mu first 'real' job or career and now earn enough to live a decent and consistent life and can now save money and sort out my credit score.


1. Does paying a standing order to yourself improve your credit rating? By this I have 2 current accounts. Wages paid in to one and bills from the other. I have set up a standing order to send money from wages account to bill account. (both with different banks).

2. Does it equate to - the more direct debits the better your credit score? or is there a certain cut off point where it doesn't matter how many direct debits you have on your account?

3, Do the values of direct debits effect your credit rating? for example is a £50 direct debit better for your credit rating than a £6 direct debit?

4. Does this have an effect on your credit report?

5x £10 direct debits or 1 £50 direct debit

cheers

It's not been said yet...

Ignore that score. My score is 556 and although it may appear poor to the CRA that scored me my credit is actually very good. I pay everything on time. I have no late payments, no defaults, no CCJ's or worse. My credit cards are not maxed to the limit, my oldest credit agreement is quite old. I'm not on the electoral roll though but I still get very good offers of credit at 0%.