Is it better to pay off more to increase credit?

Chris_P_2

Hi. When paying off the monthly balance of a credit card (purely to build up a credit score) does it matter who much is paid off?

So basically does it matter if I spend £50 or £100 In a month if the card is paid off each month?

[Deleted User]

You should clear it in full. Anything else shows you spend more than you make.

Ignore the credit score. It's not a thing.

Chris_P_2

Ok. But if i spend £100 and clear it, is it better than spending £50 and clearing it?

Or is it simply a case that WHATEVER is cleared has the same impact? Ie even clearing £1 off a card improves the rating?

[Deleted User]

Clearing in full is the key, whatever the amount.

But it's still not the rating you want to improve. You're aiming to present yourself as low risk to lenders.

seatbeltnoob

Deleted_User wrote: »

Clearing in full is the key, whatever the amount.

But it's still not the rating you want to improve. You're aiming to present yourself as low risk to lenders.

I dont think that is the case at all.

You just need to show that you have a record of paying back debt period. If you pay it back in full immediately it may not even register that you even took out any more on credit as the start and end balance is £0.

I don't think small £50, £100 balances are sufficient to show you're a reliable borrower. Assuming at some point you want to take out a big-ish personal loan or mortgage the lender will want to see you've handled reasonably sized debts in the past.

If you want to show a decent repayment, get a 0% purchase card. Do all your shopping on it for a few months. Rack up a £3-4K debt and pay back £400 or so quid each month and slowly pay it off. YMMV depending on your income. If you're on a very decent salary, double or treble that credit card [READ 0% INTEREST] debt.

You have to be strict with CC debt. Dont go on a spending spree, buy things you would have normally purchased on a debit card. KEEP all the money you woould have spent aside like you would if you were stoozing.

Arleen

seatbeltnoob wrote: »

I dont think that is the case at all.

You just need to show that you have a record of paying back debt period. If you pay it back in full immediately it may not even register that you even took out any more on credit as the start and end balance is £0.

I don't think small £50, £100 balances are sufficient to show you're a reliable borrower. Assuming at some point you want to take out a big-ish personal loan or mortgage the lender will want to see you've handled reasonably sized debts in the past.

Given that lending criteria are one of the largest secrets out there, what are you basing your assumption on?

And OP, you want to pay it off in full via DD, not manually as then it indeed may not even register on credit file that the card was used.

seatbeltnoob

Arleen wrote: »

Given that lending criteria are one of the largest secrets out there, what are you basing your assumption on?

And OP, you want to pay it off in full via DD, not manually as then it indeed may not even register on credit file that the card was used.

Your guess is as good as mine. I expanded on it on my edit.

[Deleted User]

seatbeltnoob wrote: »

If you pay it back in full immediately it may not even register that you even took out any more on credit as the start and end balance is £0.

You don't repay immediately. Wait for the statement, so that it's clear you are using it and repaying.

NineDeuce

If you pay the minimum then you are only paying off interest. If you pay more, then the actual debt decreases. It's as simple as that.

seatbeltnoob

Deleted_User wrote: »

You don't repay immediately. Wait for the statement, so that it's clear you are using it and repaying.

Yes but these £100-£50 credit balances will show up on your credit card as credit activities. But what does that prove to a lender that said person is capable of handling large debts of 10-15K upwards?

My personal experience has been that midway through paying back a £5K personal loan (which was for my brother, for his down-payment on his mortgage). My credit card offerings were really generous. More and more letters through the post offering 0% rates and the credit limit literally soared. I was at one point getting measly £1200 credit limits and now I get limits from 7-10K each card.

[Deleted User]

My experience of working with a number of lenders is that the amount spent is rarely taken into account, except in manual referrals.

The concept of credit management and discipline is established via the credit file, and affordability for larger debts is assessed via income.

i'm sure though that there will be lenders who may take a different approach.