credit card causes score drop

I have never taken much notice of credit scores as I have no need of credit but a friend showed me Noddle and out of curiosity I signed up. It transpired that not being in debt and not having a credit card meant that my credit file was considered 'thin'. So I applied for a card. Got it. Used it. Paid in full. Then my score dropped by about 30 points over the first three months and a further drop of 3 or 4 points over each of the next 3 months. I didn't understand why and signed up to Clearscore. Their report showed two negatives. One that I had a low credit limit and the other that my % utilization was high. I thought that the idea was to get a card, use the credit and pay it off to prove you are a good risk. I was told not to just put the card away as it was necessary to build up a good payment history. It doesn't look as if using credit helps to improve your score but if not using it doesn't help either what is the point?


  • Faith177Faith177 Forumite
    2.9K Posts
    Eighth Anniversary 1,000 Posts
    Ignore your score as it is meaningless to lenders they don't even see it

    What they see is how you manage the credit you have available to you. so are you always over your limit, paying the minimum or not even paying that or are you using your card regularly but paying it back in a good way and staying within your limits

    Keep doing what you are doing as it won't cause any harm if you are clearing it every month
    First Date 08/11/2008, Moved In Together 01/06/2009, Engaged 01/01/10, Wedding Day 27/04/2013, Baby Moshie due 29/06/2019 :T
  • zx81zx81 Forumite
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    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    24418507 wrote: »
    I have never taken much notice of credit scores

    Excellent. Continue the good work.
  • footyguyfootyguy Forumite
    4.2K Posts
    24418507 wrote: »
    I have never taken much notice of credit scores as I have no need of credit ...

    Remember credit isn't just about credit cards and loans.

    Many people, including you, for example buy their energy on credit

    Telephone (other than PAYG) are another type of credit.

    etc, etc.
  • SeduLOUsSeduLOUs Forumite
    2.2K Posts
    The low limit could be seen as a negative, as it demonstrates that you are not well trusted yet and so far have only been given low values. It is however better than not having been given anything at all.

    With time, the credit card you are using will gradually have it's limit increased if you keep using it well. Once you start getting larger limits but continue keeping your monthly spend fairly low in comparison and manage the payments well it will show other lenders that you can cope with having lots of available credit and don't lose control. (If you have high limits and have maxed most of them out then it might suggest that you are desperate for credit, or that you aren't disciplined and immediately spend if there's money available).

    There are no set rules as every lender sees things slightly differently, but you are on the right track. Look at your credit file objectively as if it were someone else's and think about whether you would lend money to someone based on what you can see - most of the general gists of having a good credit file boil down to common sense.
  • moleratmolerat Forumite
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    It shows how fickle the credit scores are. I got a new credit card, bringing my total available credit to 175% of my income and my score did not change. MrsM on the other hand opened a new current account with no overdraft and her score fell. Go figure.
  • I did something really similar when I first got a credit card. I was told to use it and pay it in full in order to prove I'm worth of credit, so for months I used almost all of my limit. Some lenders don't like that. Most lenders won't like your low credit limit also. Both factors will make your Experian score drop significantly, but as stated many times their score is meaningless.

    Use a credit card and pay it in full, just don't use all of it. You don't want to be seen as someone that needs all the credit he can get.
  • 2441850724418507 Forumite
    10 Posts
    Thanks to all who have commented on this thread. I feel I know more about how to manage my credit now.
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