Capital One - New card to repair rating, need advice on not spending on it.

robotgirl_2

YorkshireBoy wrote: »

It matters not what you spend on it, merely that you make a payment...of at least the minimum required...each month...and on time; the objective being to establish a pattern of 'o's on your credit file(s).

With that in mind, may I suggest you spend only £2-3 per month (Sunday papers at the supermarket kiosk after your weekly shop perhaps?) and set up a direct debit instruction to claim the full amount each month.I'm not sure I follow the logic here. Won't whatever you spend this month need to be repaid next month?

I realise I didn't make myself completely clear; I am closing my OD down at the same time (have been doing it at £50 a month) - this is why I'm always at the limit, not because I'm stretching my finances but because the limit is decreasing each month! I could *stop* doing that and my account would look healthier, but I'd sooner not have an OD at all. Obviously yes, what I spend will be paid back the next month, but it'll still be paid from the excess 50 that I didn't borrow the month prior.

Oooh, it's too late to be trying to clarify this Basically, I will be taking my OD down 50 quid, but also leaving 50 in the account so it looks like I'm 'managing' it well. If this 50 needs spending in the last week or so of the month, it can go on the CC to be paid off at the begining of the next one.

Once the OD's closed it won't matter, and then I can do exactly as you suggest and spend £2/£3 which is of course a much better option.

ramagel

robotgirl wrote: »

Oooh, it's too late to be trying to clarify this Basically, I will be taking my OD down 50 quid, but also leaving 50 in the account so it looks like I'm 'managing' it well. If this 50 needs spending in the last week or so of the month, it can go on the CC to be paid off at the begining of the next one. .

I don't follow the logic of any of this and it seems very unreal to me (but maybe that's my age) and using a credit card just to buy you some time to avoid crashing up against a reducing limit you've decided to impose on yourself is FULL OF RISK but never mind. Here's a suggestion:

Instead of doing things in this sequence:

1. Reduce OD by £50 for the month of (say) November (say to £400)
2. Spend £50 less in November
3. Be right up against the OD limit at end November (Say -£390)
4. Reduce OD by £50 for the month of December (to say £350)
5. Spend £50 less in December
6. Be right up against the OD limit at end December (say - £340)
etc etc
always being say £10 away from the limit or dancing with death on a credit card.

Why not do this:

1. Keep OD at £400
2, Spend £50 less in November
3. Be right up against the OD limit at end November (Say -£390)
4. Spend £50 less in December
3, Be further way from the limit., already looking better at Say -£340
5. Spend £50 less in January
6. Be even further away from the limit, looking much better at -£290
7. Spend £50 less in February
8. Be nearly £200 away from your OD limit at -£240 at end February
9. Reduce your OD limit by £100 for March to £300
10. Spend £50 less in March and still be over £100 away from your limit.

and so on and so on

In other words get further away from your limit before YOU make the choice to reduce it and apparently this will look better to the bank whose only concern is how close you are to the limit, not how much you owe (which is what doesn't make sense to me, but there we are).

If you must have a credit card to 'repair' your credit rating (and I have no idea if this really works) then I wouldn't recommend using it to try to reduce how close you are to your OD limit, since you seem to suggest more or less spending the same amount of money, just 'holding' it somewhere else for a while, but it's still got to come from your bank account and will therefore still affect how close you are to your chosen OD limit. No, the best way is to reduce spending over two months or so and then reduce your OD limit to a level sufficiently above your spending to make the bank happy.

If you use the card and set up a DD to clear the full balance every month, that's going to look great on your CC but if you get hit by a DD when you weren't expecting it, that's going to completely blow a hole in your carefully managed OD reduction strategy.

What might work, however, is finding a modest recurring charge to make on your CC for something you actually use (topping up your mobile by £5/mo maybe?) and then paying it off by standing order or dd* well inside the 'due by' date. Once you've set up the small recurring charge, cut your card up and don't use it. You'll get the string of '0's on your history, you won't have frittered the money away on stuff you don't ordinarily use and you'll run no danger of overspending. Make sure you check the Ts&Cs carefully to make sure there's no minimum spend necessary to avoid a charge, no annual fee or any other ways these merciless people will gouge money out of you .....

* I don't know about this card, but some cars quite deliberately only have a dd option for the minimum payment, not the full amount, in the hope you'll not pay off in full and have to pay interest.

This has been long, but I hope it helps.

By the way, I just want to say it looks like you've been doing a fantastic job paying off your debts, Now is not the time to be risking careful work and sacrifices with fancy timing plans with credit cards. Keep doing what you've been doing: you are clearly making it work.

robotgirl_2

ramagel wrote: »

This has been long, but I hope it helps.

By the way, I just want to say it looks like you've been doing a fantastic job paying off your debts, Now is not the time to be risking careful work and sacrifices with fancy timing plans with credit cards. Keep doing what you've been doing: you are clearly making it work.

Ramangel, that's all wonderful advice, thank you!

The only reason I have been closing my OD down in this manner is because I just wanted it gone (a psychological thing perhaps), but your suggestions seem a much more practical way of dealing with the problem.

I think I have panicked a bit as it's become clear over the last month or so that next year might be my 'apply for mortgage year' so I'm desperate to get the best 'rating' I can before that time comes. This has possibly clouded my thinking a little, but of course you are correct in that it would be silly to risk a lot of hard work for one CC. I think your idea of setting up one regular payment on it (I could use it for topping up my travel card, about £20 a month in pay-as-you-go) and cutting it up would be the best way forward, especially if it transpires that they won't allow a DD for the full amount (sneaky!).

Thank you for that reply though, however long, it contained some very sound words of wisom!

ramagel

robotgirl wrote: »

The only reason I have been closing my OD down in this manner is because I just wanted it gone (a psychological thing perhaps),

Yes, and we sometime underestimate the psychology of things like this: you didn't. Your idea was excellent (and even more excellent was the fact that you could and did stick to it), maybe just a month too fast for comfort!

Stress, pressure, living under a financial cloud and to a strict budget can sometimes paralyse our ways of thinking, meaning we no longer see the obvious (whcih we once would have done) and we look for ever more clever and convoluted ways to solve a problem (that may no longer actually exist - we just think it does). It applies in many aspects of lifge and can affect us at any age (I use the word 'us' deliberately inclusively, although my issues are not financial).

Good Luck - oh, and don't rush to a mortgage too quickly thinking that's the only way to a roof over your head - we wouldn't want to see you back in 2 years time posting in the Mortgage Advice forum!