Reviving my credit score

lucypez

Hi I'm new to MSE forums but just wanted to ask a couple of questions

Got into a bit of a pickle when I turned 18; got declined for a phone contract so went to my bank to explain how it works and what I could do.. Ended up walking out with a Barclay card and £300 overdraft (in my eyes free money - naive I know). As you can imagine now at 22 years old, I have a very bad credit score and still outstanding debt on my report - the creditors / collectors have now stopped contacting me though. My score is 435.

I've been approved for a CashPlus Credit Builder account, my card will be with me in the next couple of days; I wondered if anyone has had any dealings or could explain how it works? I have a total of £71 credit for 12 months and they'll be debiting about £5 +/- per month to repay the balance. My main question is; DO I SPEND THIS MONEY?

Is it a card for spending then paying my bill (now I've learned my lesson it's what I intend to do) or is this a virtual loan where I can't actually access the money? Either way is fine for me because I can start improving my score again.

Thanks in advance!

20aday

Hello Lucy and welcome to the MSE forums.

First and foremost. Please ignore your 'credit score'. This is a computer generated number from the three credit agencies in the UK (Callcredit, Equifax and Experian) that bears no resemblance to a creditors' own checks that take place when you make an application for a mortgage etc.

How much do you currently own Barclays for your outstanding debt?

In terms of the CashPlus Credit Builder account you are "loaned" £71.40 'interest free'. You pay £5.95/month over the course of a year. This loan cannot be used for your own expenditure.

If you meet the terms of the agreement with APS they'll report back to your credit file(s) and this will help in terms of credit building.

lucypez

Thanks for your response and clarifying regards to the CashPlus account.
So basically (correct me if I'm wrong). I can just leave the money on the card as is for the 12 month agreement period and it will pay itself - is that right?

I owe £245 to Barclays, default date 09/05/2013.

jamesd

lucypez wrote: »

I've been approved for a CashPlus Credit Builder account, my card will be with me in the next couple of days; I wondered if anyone has had any dealings or could explain how it works? I have a total of £71 credit for 12 months and they'll be debiting about £5 +/- per month to repay the balance. My main question is; DO I SPEND THIS MONEY?

You have already spent it. The money is taken by them to pay their charges. None is available to you for any use at all.

The deal is, they charge you to give you a series of positive entries on your credit report if all of the direct debits are paid on time.

"Advanced Payment Solutions Ltd (APS) lends you a limited fixed amount which goes towards paying for all or part of a year’s use of the account, interest-free. The loan is paid to Advanced Payment Solutions Financial Limited (AFL), so no money changes hands and it’s never available to spend"

"Important note:

Payments must be made on time to avoid damaging your credit rating further, as both on-time and late payments are reported to the credit reference agencies. To avoid this, make sure that your account always has a balance equal to your monthly fee, either £5.95 or £9.95 (see your terms and conditions to confirm your fee)."

Do as they say and always ensure that you have enough money in the account to pay the bill, else a problem with a DD could harm your credit record instead of helping.

lucypez wrote: »

Got into a bit of a pickle when I turned 18; got declined for a phone contract so went to my bank to explain how it works and what I could do.. Ended up walking out with a Barclay card and £300 overdraft (in my eyes free money - naive I know). As you can imagine now at 22 years old, I have a very bad credit score and still outstanding debt on my report - the creditors / collectors have now stopped contacting me though. My score is 435.

Sadly you're still a poor user of credit. Never sign up for an account until you understand how it works. Ask here first, not after!

Your credit scores from the various credit reference agencies are a useful tool to track changes over time and get some idea of how lenders may view that part of your situation but they are far from perfect and don't reflect everything that a lender will do, nor the lender preferences for the records they want in their customers. A poor credit score is just the sort of thing that CashPlus wants even though it's not what most want. No need to pay for a credit score because they are available free in a range of places, just ask if you don't know how to get them free. Then pay attention to the change over time and understanding what cause the changes as a tool to help you to understand how credit scoring can be affected by things. What the available scores don't do is include critical things like job and time in the job, accommodation and time in that as well as its type and sometimes they even miss adjusting based on bankruptcy. So an imperfect but still useful tool.

You might want to consider using the checking tools available from MSE and other places to see if there are any normal credit cards available to you. One credit card in addition to this would probably be helpful to you if used a little and paid off in full each month with a direct debit to ensure that a payment is never missed. These tools work by asking real lenders to apply their real scoring rules to say whether they think that the credit record would make you an acceptable customer so they have a fairly good success rate in predicting what will happen if someone applies.

takman

Instead of wasting £5.95 a month why don't you just pay off the £245 that you owe to barclays?. If you can't even pay off £245 then there is no point in improving your credit report because you will never be able to afford to pay off any credit that you will be able to get.

lucypez

I'm doing both.