Why would paying off the credit card in full improve credit rating?

leedsfan_3

Hi guys perhaps you can explain to me why a bank would reward you for paying off your credit card in full. I can't understand why this would be of anything that a bank would see as beneficial because they are not gaining anything financially. Surely your credit rating improves more if you are actually paying the credit amount off courtesy of some form of APR payment?

Secondly, presumably they are wanting you to put x amount on credit per month before your credit rating improves?
As always thanks for the info :T

exel1966

You won't get any more 'rewarded' for paying your account in full each month or partially. As long as you can demonstrate you are disciplined enough to make ontime regular payments it has no bearing.
What does matter is how much available credit you have to your name and how much of it has actually been used up.

jamesd

Do note that if applying for a mortgage when credit scoring strictly, some lenders may pay attention to whether you're clearing your balance each month or not, being more likely to lend to those who do. Some lenders are apparently doing this now.

ontheup_3

How much you owe or how much you pay as exel says has no bearing on your rating , your rating is made up of credit accounts you have and making payments every month thus giving you a string of "0"'s on you account , they are what makes your rating good or bad (if you dont make payments)

The paying off in full or part is just for the bank/CC company involved yes they dont earn interest from you but they will know you are a trust worthy borrower and they know they will earn money from you at one point or another wether its BT's , Loans , sometimes when you have a tight month and dont clear your card off .

I think its about 70%+ of all UK CC's accounts are cleared in full , but a bank can't descriminate between each as they dont know wether you might start paying or in the case of someone that only pays part they might start paying full , also they do make money on you using the card , it might not be as much as the interest would be but still covers all thier costs !!

I pay all my cards in full but still they throw credit at me , so aslong as you ensure you make your minimum payments on time every month your credit can only improve

leedsfan_3

i see....well once again many thanks amigos I shall look at getting something sorted out very soon.

rathernot

jamesd wrote: »

Do note that if applying for a mortgage when credit scoring strictly, some lenders may pay attention to whether you're clearing your balance each month or not, being more likely to lend to those who do. Some lenders are apparently doing this now.

How do they actually know this though? I ask because I recently looked at my record at Experian (curiosity as it's the first time I've looked at it) and there is a string of 0's next to my Amex and previous cards but no record of what was paid.

I'm quite surprised they can disclose that information to be honest?

jay78

rathernot wrote: »

How do they actually know this though? I ask because I recently looked at my record at Experian (curiosity as it's the first time I've looked at it) and there is a string of 0's next to my Amex and previous cards but no record of what was paid.

I'm quite surprised they can disclose that information to be honest?

All the Experian report tells them is wether you are up to date with your payments. Also what percentage of your limit you are up to.

With regards to how much you pay each month, the only credit report that shows this is the Call Credit one. It shows precisely what your balance is each month. However, I don't know of any company that does an initial credit search with them. You would have thought that it would be more useful to them for credit scoring.

rathernot

jay78 wrote: »

All the Experian report tells them is wether you are up to date with your payments. Also what percentage of your limit you are up to.

With regards to how much you pay each month, the only credit report that shows this is the Call Credit one. It shows precisely what your balance is each month. However, I don't know of any company that does an initial credit search with them. You would have thought that it would be more useful to them for credit scoring.

As you say I can see (and agree) why the fact I pay 100% of my outstanding balance each month is more useful to know that simply knowing that I have paid (at least) the minimum amount on time, but I'm also very surprised that they can pass on details of your balance details to a third party.

I guess it's all there in the T&Cs though.