Why doesn't my Lloyds debit card count towards by credit score?

Eternal1

When I was younger I missed a lot of direct debit payments and messed up my credit rating but that was 5 years ago now and since then I'd had 4 direct debits coming out of my bank every month for the last 5 years and I have never missed a single payment, yet my credit score still comes up as terrible.

Why do all those payments count for nothing? If I get 1 credit card and use that to pay for things I buy online and pay my direct debits and then use my Lloyds account to pay off my credit card, will that improve my credit rating?

Thanks.

Willing2Learn

If I were you, I would get a credit card and use it to buy things within my monthly budget (groceries, petrol etc), and then pay off the balance in full after the statement was received (by direct debit)

Also, ignore your credit score. It is your credit history that is important. Lenders look at the data held in your credit files, added to the data you submit in a credit application, to score you against their criteria and policies.

Having a credit card, and managing the credit account successfully will improve your credit history as viewed by lenders.

Eternal1

Thanks.

I've never used a credit card before so when I pay for things, will I get a bill at the end of the month which I can just pay online or something?

Willing2Learn

You get a monthly statement. If you pay the monthly statement in full before the due date then you do not pay any interest. That is why I was advising only to spend for stuff that is in your ordinary monthly budget, then you will not overspend. The simplest way to pay the balance is to set up a direct debit to pay the full balance. That way, you cannot forget...

Terry_Towelling

Not sure that your credit score is the most useful thing to increase - but your creditworthiness is. You have to use credit to create a credit profile and use it responsibly to get yourself into a position where lenders will see you as a worthwhile risk.

Using a debit card will only help your credit history/score if you use it to pay off credit/debt. Just buying petrol/groceries/clothes won't change a thing because you are effectively just paying your own cash out when you do this.

I guess the reason why defaulting on Direct Debits ruins your credit rating is because the bills you were paying turn into unpaid debts. So, you might think that paying your Direct Debits properly would have the opposite effect. Well, it might but only if those Direct Debits are going to pay off debt or a credit agreement.

For example if you pay a whole year's car insurance in 12 monthly instalments by Direct Debit, that might help your credit history - not because you used a Direct Debit to pay it but because you will have settled a debt on time. Similarly, paying your credit card bill in full by Direct Debit every month may have the same effect - again because you have serviced a debt, not because you used a Direct Debit to do it.

If your credit history is poor you may struggle to get a credit card - but, if you do, make sure you pay the bill off in full every month before the payment due date.

Willing2Learn

Terry_Towelling wrote: »

If your credit history is poor you may struggle to get a credit card - but, if you do, make sure you pay the bill off in full every month before the payment due date.

Having a poor or thin credit history is not really an obstacle to getting a sub-prime card.

@OP - Check out the article linked below for more information on suitable sub-prime cards:
https://www.moneysavingexpert.com/credit-cards/bad-credit-credit-cards/

Eternal1

Thanks Terry Towelling, Willing2Learn.

Just two more questions. When you say using the card to buy groceries etc won't do anything, does this mean I need to be making doing things like paying off my gas and water bills, internet bills etc? I don't even need a credit card as I can easily afford to pay for everything right away anyway so I only want to use it for things that will definitely increase my credit score / history.

Also the only card I can get is a capital one card, just to be clear, if I pay off the debt before the due date, I won't get charged any interest or fees? Thanks.

PRAISETHESUN

Your credit file reflects exactly that - CREDIT accounts. Your debit card will not be listed as it is not a credit facility, although your current account it is linked to will be if it has an active overdraft.

As for the missed direct debits, if they were for services which report to your credit file (eg. utilities, phone contract repayments, etc) then that will explain why your credit history over that period was poor. Missed payments will most certainly count against you, and can lead to defaults/CCJs if left unpaid.

As you have presumably held no credit in the intervening period, there will be nothing for lenders to gauge your creditworthiness on, so they will be hesitant to lend to you. Only the most recent 6 years of credit history is visible to lenders. I'd recommend looking at getting a credit building credit card (Aqua, Capital One, Marble, Vanquis, etc) and use it to pay for every day spending. Make sure to pay it of in full after you are sent your statement (set up a direct debit to make sure you do this!) and slowly but surely your credit history will improve and you should start to get better offers, and be eligible for better cards after 12-24 months.

Also as always, ignore your credit scores provided by the CRAs. They are meaningless. Every lender will generate their own internal score based on the contents of your credit file, so focus on improving that to include things potential lenders would want to see

Willing2Learn

Eternal1 wrote: »

Just two more questions. When you say using the card to buy groceries etc won't do anything, does this mean I need to be making doing things like paying off my gas and water bills, internet bills etc? I don't even need a credit card as I can easily afford to pay for everything right away anyway so I only want to use it for things that will definitely increase my credit score / history.

Also the only card I can get is a capital one card, just to be clear, if I pay off the debt before the due date, I won't get charged any interest or fees?

Use your credit card in the same way as you have been using your debit card; to pay for things that are within your normal everyday monthly budget. Don't use it to but things on long-term credit as the interest is very high.

And yes, just pay off the full balance of the CapitalOne card after the statement has been issued, and before the due date. Choose the direct debit option to "pay the balance in full" in the payments screen of your CapitalOne card and you won't go wrong.

Eternal1

Willing2Learn wrote: »

Use your credit card in the same way as you have been using your debit card; to pay for things that are within your normal everyday monthly budget. Don't use it to but things on long-term credit as the interest is very high.

And yes, just pay off the full balance of the CapitalOne card after the statement has been issued, and before the due date. Choose the direct debit option to "pay the balance in full" in the payments screen of your CapitalOne card and you won't go wrong.

Than you for the help

Willing2Learn

Eternal1 wrote: »

All my direct debits are for fixed amounts though, can I set up a direct debit for an unknown amount and it will adjust itself automatically to pay the credit card total?

Correct. If you set up the direct debit to pay the full balance of your statement, then the direct debit amount paid monthly will vary accordingly