Should I get a great rate loan for the pure sake of my credit file?

TheSilverStag918

I have a poor credit rating!
- I have low revolving credit (my cards total about 700 squid).
- I have a default from British gas of 600 where flatmates didn't pay a bill in 2012 (and I didnt find out about it until 2016 when it was a default registered in 2015) - I am yet to pay it off after failing to contact the ukrainian flat mates (young and naive when I said "oh I will just put it in my name" and then trust them).
- My credit cards are new (13 months and 2 months).
- No matter how many times I register myself on the electoral role it is never on my credit file.

I am at peace with this. I am currently going through a process to sort it out and have been for a year. I don't need advice on this bit as it is steadily improving but wanted to add some context.

I took out a 5k loan almost two years ago. It was direct from my bank, was underwritten without credit check as they just reviewed how I treat my current account with Lloyds (hence being approved with a low score).
I have never missed a payment and the interest was darn low (around 3.9% APR I think) so I have enjoyed its positive affects on my credit score and helped me pay for my wedding.
The loan only has about two months left and was wondering if would actually be beneficial to take out another loan?
As I never miss payments etc, would it improve my score enough to warrant taking another out? I was worried that with my low revolving credit, living a little in and out of a large overdraft facility and having a what will soon be a settled default - that without the loan my credit score will cease to grow further pushing the mortgage chance with my wife closer to the sun.

Thank you in advance

dieselv2

You probably won't get one with a default and poor credit. Try and eligibility credit if you want one but if your in debt it's not wise to add more debt. I've learned this one hard way.

Ebe_Scrooge

No.


It would be sheer madness to take out a loan and pay interest on it just for the sake of improving your credit rating ( your "score" is totally meaningless ).


What will help far more is to stop using your overdraft, find out why the CRAs are not recognising that you're registered on the electoral roll ( it can take a few months for them to register this ), and use your credit cards sensibly. By which I mean, use them regularly for everyday spending ( fuel, groceries, etc. ), and pay them in full, on time, every month without fail. Doing this will, over time, improve your credit history.

TheSilverStag918

dieselv2 wrote: »

You probably won't get one with a default and poor credit. Try and eligibility credit if you want one but if your in debt it's not wise to add more debt. I've learned this one hard way.

I am preapproved.. my bank does not credit score if they have years of money going in and out of your current account. Just like my old loan.

The idea would be to get the loan, place in the savings account and hope that temptation does one.. although my spouse stops that sort of thing.

TheSilverStag918

Ebe_Scrooge wrote: »

No.


It would be sheer madness to take out a loan and pay interest on it just for the sake of improving your credit rating ( your "score" is totally meaningless ).


What will help far more is to stop using your overdraft, find out why the CRAs are not recognising that you're registered on the electoral roll ( it can take a few months for them to register this ), and use your credit cards sensibly. By which I mean, use them regularly for everyday spending ( fuel, groceries, etc. ), and pay them in full, on time, every month without fail. Doing this will, over time, improve your credit history.

Yes this is what I do.. I only use for fuel and pay it off. Just got a tesco card so will use that for the extra points of food. I have been quite religious with thay for a year with the exceptions of going abroad.

Ok probably a bad idea loan wise then. Was just interested as if it would drastically improve the score and my lendability then I would go for but if it's a case of spending a pound to make a penny then I will just rejoice when my current loan is clear and get on with the credit waiting game.

Thank you

Ebe_Scrooge

Agreed. Taking out and repaying a loan probably would - very marginally - reflect favourably on your credit history. But it really is so not worth it, especially as you'll be paying interest. As I say, pay off all current debts, use credit cards regularly and sensibly, stop using your overdraft, sort out the defaults - these will all have a much bigger impact, and cost you nothing.

TheSilverStag918

Ebe_Scrooge wrote: »

Agreed. Taking out and repaying a loan probably would - very marginally - reflect favourably on your credit history. But it really is so not worth it, especially as you'll be paying interest. As I say, pay off all current debts, use credit cards regularly and sensibly, stop using your overdraft, sort out the defaults - these will all have a much bigger impact, and cost you nothing.

Ok thank you. One more question whilst I have gained your attention.

The percentage of my revolving available credit that I use each month I understand affects your score (if each month I am in 99% of available, paying it all off but then in it again the following).
What do you believe the percentage threshold is for good to bad?
OR... even if I use 100% if I pay off the entire balance it is still a positive?

Ebe_Scrooge

A good question - and the subject of much debate. On the one hand, as long as you pay back in full every month, this would tend to indicate that you're not struggling - which is a good sign. On the other hand, there is a school of thought that says you should aim to be using only about 75% max of your available credit.

I would definitely advise against using 100% of your available credit every month, but aside from that I'm afraid I can't give any constructive advice on that one. Personally I'd be tempted to say use something like 75% or 80% ( particularly if the card offers any kind of rewards ), but that's just me.

In your circumstances, I think the best advice is to use the cards regularly, obviously repay in full every month - but sort out the ER problem, work on sorting out the default, and work towards the point where you never need to use your overdraft facility. Your credit history ( please, stop referring to the score ) WILL improve over time. Believe me, I've been there, done that, got the t-shirt

datlex

It is totally mad to take out unnecessary credit of any kind. You should always aim to have zero credit. That does not mean you don't have credit cards, but instead that you should use them as a means of payment rather than additional funds.

Ben8282

There is no point in taking out a loan and paying interest for no reason other than to improve your credit rating.
If you already have a loan at 3.9% and think you can get another loan (don't be so sure) then there can't really be much wrong with your credit rating can there?
What is the actual purpose of this desired improvement?
With regard to % of credit used, as the total of your credit (£700) is so low you really don't have much alternative but to use almost all of the available credit in order to put any sort of decent amount of spend through the card(s).

Dobbibill

Don't take out a loan - this is a bad idea!

When your current loan finishes in a few months, use the money you would have paid to stay out of the OD and save towards the future mortgage. This will give you time for the default to expire on your file and build up a bigger deposit.

If you are having problems with the ER information getting to the CRAs, double check the formatting of your address (flats are known to have this issue). Also check with your local council, they will be able to tell you when they send the information over to the CRAs. Allow an extra few months for it to update from then.

Also, ignore the score......if it was so important why were you not declined for the loan you currently have?