Building credit rating, credit card

MattyHughes

Hey,

I'm trying to build a good credit rating by spending on my cards and paying it off in full. I've got automated direct debits to clear them both in full every month, and i never spend more than my (interest free student) overdraft wouldn't cover.

My question is if i pay it off early does it still count as a positive towards my credit rating? Like i've got £30 pounds on one now, should i wait until it's due to pay it (9th of March) or will it still count as a positive on my credit record if i pay it now.


I also got rejected from one card i applied for. My thinking in applying for it was if i get it now then when i come to apply for a mortgage (at least 6 years from now) opening more accounts now will increase my average age of account. Will being this rejection matter when i come to apply for a mortgage?

Thank you for any replies (this is my first post ever btw :hello: )

[Deleted User]

Wait for your statement, then clear in full.

Lenders don't see accepts or rejections. Just searches.

Not sure how you thought opening more accounts would increase your average age of account though. It will reduce it.

Lastly, stay out of your overdraft.

Ebe_Scrooge

MattyHughes wrote: »

I've got automated direct debits to clear them both in full every month, and i never spend more than my (interest free student) overdraft wouldn't cover.

My question is if i pay it off early does it still count as a positive towards my credit rating?


:hello: )

DD to pay the card in full every month = good on your credit history. Paying early = bad - well, not bad as such, but you don't get the benefit of the CC company reporting to the CRA that "here's a good borrower, he always pays on time". Because it looks to them that you're not using credit. Just let the DD take care of it each month, and keep out of your overdraft, this will do wonders for your credit history.

MattyHughes

Unfortunately i'm stuck in my overdraft, it's interest free and I'm paying it off, should be completely gone in 6 months.

Thank you, i'll wait to pay off my credit card.

Sorry i mustn't have been clear. I wont be applying for a mortgage for 6 years, so opening an account now would mean in 6 years time I would have a 6 year old account. So although it decreases my average age now, i'm thinking for the future - maybe i'm over thinking it.

Thank you for your reply

MattyHughes

thank you, I was hoping i'd get the benefit when paying off early. I'll apply a little patience. I just worry the direct debit wont go through and I'll end up in trouble. Once i paid my credit card off twice, once manually and once by direct debit - maybe i should have more confidence in the DD

Ben8282

Just to clarify something. I think your question may have been slightly misunderstood.
You say that payment is due by 9th March so I am assuming that this £30 is the balance of the statement that was issued around 11th February?
Unless you have any specific reason for believing there will be a problem with the direct debit, so long as it is mentioned on your credit card statement that 'Your direct debit for £X will be taken on 9th March 2017', I wouldn't worry. Just let the direct debit go through.
There is however noting wrong, as such, with paying before the payment due date if you so wish. The advice given by others refers to not paying before the transaction appears on the statement, which could cause a nil balance statement to be issued every month and create the impression that the card was not being used. So long as the amount is actually shown on a statement, you can pay it off whenever you wish. Some people like to take advantage of the full interest free credit period while others perhaps just like to get their bills paid off.
If you do decide to pay early though make sure of the policy of your credit card issuer as to what happens with the direct debit when manual payments have already been made during the period. Your statement may say something like 'Manual payments received more than X working days prior to the payment due date will reduce or stop the DD'. Make sure you adhere to this and allow a bit of extra time. If there is any doubt or you can find nothing specified then check with the credit card provider first otherwise you may end up paying twice as you did before.
On the subject of average account age, you are still young. Choose a couple of accounts, say 1 current account and 1 credit card and make the decision that you will NEVER EVER close those accounts. As you grow older this will do wonders for the average age of your accounts. I currently have 1 account +30 years and 2 accounts +20 years being reported.
One final piece of advice. Get the overdraft repaid ASAP. If either of your credit cards offer existing customer 0% offers, consider transferring the overdraft to 0% on a card. A 0% balance on a credit card looks reasonable. An overdraft looks bad because it creates the impression that you are unable to live within your means and have to go overdrawn every month.

MattyHughes

Ben8282 wrote: »

Just to clarify something. I think your question may have been slightly misunderstood.
You say that payment is due by 9th March so I am assuming that this £30 is the balance of the statement that was issued around 11th February?
Unless you have any specific reason for believing there will be a problem with the direct debit, so long as it is mentioned on your credit card statement that 'Your direct debit for £X will be taken on 9th March 2017', I wouldn't worry. Just let the direct debit go through.
There is however noting wrong, as such, with paying before the payment due date if you so wish. The advice given by others refers to not paying before the transaction appears on the statement, which could cause a nil balance statement to be issued every month and create the impression that the card was not being used. So long as the amount is actually shown on a statement, you can pay it off whenever you wish. Some people like to take advantage of the full interest free credit period while others perhaps just like to get their bills paid off.
If you do decide to pay early though make sure of the policy of your credit card issuer as to what happens with the direct debit when manual payments have already been made during the period. Your statement may say something like 'Manual payments received more than X working days prior to the payment due date will reduce or stop the DD'. Make sure you adhere to this and allow a bit of extra time. If there is any doubt or you can find nothing specified then check with the credit card provider first otherwise you may end up paying twice as you did before.
On the subject of average account age, you are still young. Choose a couple of accounts, say 1 current account and 1 credit card and make the decision that you will NEVER EVER close those accounts. As you grow older this will do wonders for the average age of your accounts. I currently have 1 account +30 years and 2 accounts +20 years being reported.
One final piece of advice. Get the overdraft repaid ASAP. If either of your credit cards offer existing customer 0% offers, consider transferring the overdraft to 0% on a card. A 0% balance on a credit card looks reasonable. An overdraft looks bad because it creates the impression that you are unable to live within your means and have to go overdrawn every month.

Thank you for your reply I really appreciate it. I have logged on and found the last statement, previously I'd just looked at the balance. The last statement was the 10th of Feb, saying payment date is the 9th of March, Min balance £5. Under direct debits, it has my main account with with the full amount for this month (27.50) but no date? This is the first ever statement with the card so i know there can be problems, but it seems to be showing.

You're reply has been really helpful, before I didn't understand the difference between a statement and a balance. So long as it the amount is shown as debt on the statement I get the benefit of looking good on my credit report.

I appreciate your advice on moving my overdraft onto a card, however I'm not going to take it. I trust that i'll never get charged any interest on it and if i move it to a card i'll at the very least most likely have to pay a balance transfer fee, perhaps interest if i make a mistake. I've been in my overdraft throughout university so a couple of months now as i pay it off can't make it much worse. Finally, i don't need a perfect credit history now, I need it in around 6 years time - so they wont be too interested if i was in my overdraft all that time ago? Provided after i pay it off now I never touch it again?

On age of accounts there is another question you may be able to help me with, forgive me if i should start a new thread (i'm new to this). My main natwest account is already 8 years old, so that will look great as my oldest account and do well for my average. I opened it as a under 18 account, and it's been converted to a student account. Next year I will graduate, will i keep the same account when i'm not a student? And does it work the same way for the student credit card i've got?

Chappaz

MattyHughes wrote: »

thank you, I was hoping i'd get the benefit when paying off early. I'll apply a little patience. I just worry the direct debit wont go through and I'll end up in trouble. Once i paid my credit card off twice, once manually and once by direct debit - maybe i should have more confidence in the DD

I had this concern as well.

Generally, once a direct debit is up and running, you have nothing to worry about (providing you have money in the account to pay the DD).

The only part you have to be cautious about is right at the beginning, because it can take companies a varying number of weeks to actually establish the direct debit. There have been people before who have relied on a DD paying their first payment which is not yet active.

What I did was set up the Direct Debit, but I paid the first two monthly payments manually a couple of weeks before the due date (i.e. just after the statement was issued). I don't know about other cards, but with my Aqua card, they don't take the DD if you've already settled the payment yourself before the DD date.

This way, I was able to guarantee that the first two payments were made on time, and allow my DD ample time to get itself up and running before relying on it for automatic payments from that point onwards.