Advice on building credit

Don80

Hi

This is something I had to deal with, stupidity in my early 20s, and a lesson learned! My top tips would be:
1. Sign up to MSE's credit club, Noddle and Clear Score. That lets you see how your credit is improving (the scores are a guide - they don't mean anything to lenders, but give you an idea - but don't take them literally!). You need all 3 to see all the credit reference agencies.
2. Use your credit card and pay it off in full every month.
3. Don't use an overdraft with your bank account if you can avoid it.
4. If you are running a balance, pay more than the minimum. Your credit file would show that you only paid the minumum, so even £1 more looks better.

As you do that, you'll see your "score" improve, and the card matchers will start showing better credit cards. You can take these out so that you have a higher overall credit limit - but watch your credit utilisation, try and keep it below 30% of the total, and the limit on each card.

I've seen conflicting information (maybe someone will know) about the ratio of your credit limits to your income. My total limit comes to about half my annual salary, some have said you shouldn't have more than that. The perceived risk is that you would max out the cards and then not be able to pay.

This has worked for me, at the start of the year I made a big purchase on a credit card, and was offered the HSBC and Tesco Bank 0% balance transfer cards. (HSBC recently had a great offer). I transferred the balances, so this means I'm not paying any interest, and I am paying way more than the minumum each month. I applied for the HSBC one first and got a decent limit, but just short of what I needed, so did the Tesco one and got a whopping big limit! I wouldn't be applying for any more without closing some old ones - not that I need to at the moment. But you need to plan ahead as it can take a couple of months for a card to show as closed on your credit file.

eDicky

Don80 wrote: »

2. Use your credit card and pay it off in full every month.

But not before your monthly statement, otherwise it will not be reported to the CRAs and add to your credit history. You could however pay some in advance of your statement if you have used more than say 30-50% of your credit limit, to appear more favourably.

20aday

eDicky wrote: »

But not before your monthly statement, otherwise it will not be reported to the CRAs and add to your credit history. You could however pay some in advance of your statement if you have used more than say 30-50% of your credit limit, to appear more favourably.

I second this comment.

I used to pay my cards off as soon as the transaction had posted to my account, thinking I was doing the 'right thing'; it wasn't until I came across some sound advice, here on MSE, that I wasn't helping my credit history at all.

Jaymcfadyen19

Thanks

I do most of the above so hopefully overtime will make a difference

Long way away from a 0% card but il get there.

Thanks for the information