Paying for things with Finance - Effects on Credit History?

TheJasperCo

Hello,

I'd like to make a couple of "large" purchases over the next few weeks: a new phone and a pedal bike. If I pay for these using a 12 month (or shorter) finance option, will this act as a mark against me on my credit report? I'm in my mid-20s and thinking ahead to future decisions regarding mortgages and buying a car, do finance purchases count against you? Normally I would save up and pay for most things outright, but that won't be possible for the foreseeable future.

That's assuming 0% interest and all monthly installments are made on time.

Thanks.

[Deleted User]

The debt will appear on your credit files and lenders will factor it into their decision, mainly affordability.

TheJasperCo

Deleted_User wrote: »

The debt will appear on your credit files and lenders will factor it into their decision, mainly affordability.

Only for the duration of the loan, or permanently (i.e. even once it's paid off)?

DCFC79

It will be on your report for the 6 years, once it's paid it will get marked as settled.

Nebulous2

TheJasperCo wrote: »

Only for the duration of the loan, or permanently (i.e. even once it's paid off)?

Nobody really knows and if they do they won't tell! Here's my take on it, for what it's worth.

Settled, paid off accounts are positive. They show you've made an agreement and stuck to it.

Accounts in progress are fine, as long as you aren't really pushing affordability and are making payments as agreed and on time.

Some lenders such as bike shop finance may not report to credit reference agencies at all.

Finally, finance is a tool to be used to your benefit. If I want a new bike I work out the cheapest way to buy and pay for it, with any impact on my credit history not featuring at all. We regularly see people on here doing things, with a cost, simply to improve their chances for an unspecified something at an unknown future date. That's working for it, rather than making it work for you.

PixelPound

Nebulous2 wrote: »

Finally, finance is a tool to be used to your benefit. If I want a new bike I work out the cheapest way to buy and pay for it, with any impact on my credit history not featuring at all. We regularly see people on here doing things, with a cost, simply to improve their chances for an unspecified something at an unknown future date. That's working for it, rather than making it work for you.

:T Great point Nebulous2 and one that isn't made often enough. So often you either here of people paying interest on CC balances they could clear or taking out loans to sit in an account in the vein hope their "credit score" will improve. It is one thing being mindful of your credit history to maximise the success of a future application (e.g. not taking on new credit if you want to apply for a mortgage in a few months, or doing so with the aim to delay the mortgage application to minimise the effect it has) and another applying because you hope it will improve your general credit worthiness, "just in case" you should ever need a more personally valued credit in future.