Credit building advice!

tim89

Hello, looking for some advice. Sorry for the long post, trying to set the picture here… I am currently paying off a credit card with Barclaycard, circa 3K remaining. I have not missed payments on this account since a few years back, but have only been paying the minimum each month. Looking at my credit report, it is not looking great. I know the credit score is not to be taken too seriously, but I want to start increasing my score and improving my credit worthiness. Currently the only other outstanding loan is a car PCP deal which I have never missed a payment on (about 2.5 years into the contract with 18 months left). I would be looking to possibly enter into a new PCP deal, or maybe lease, but worrying that unless I can start to improve things, I would not be accepted. A few years ago I had myself in a bit of a difficult position, caused by a few factors but which ultimately left me with a small debt problem.

1. An old account with Lloyds was classed as defaulted. At the time I thought the account had been closed. Charges kept rolling and causing an OD which I was not aware of. Totally my fault as I had moved and not updated my address with Lloyds (thinking the account had been closed). I only found out when it was passed to a collection agency, when I then set up payments and paid the balance off in full last year.
2. 2 years ago I had an MBNA card which went into arrears for a couple of months, before I then paid off in full and closed (this was not a default). MBNA were helpful when I explained the situation I was in and I was able to make small payments on just the interest, then was able to pay in full.
3. I have a joint account with my now ex. I am looking option of getting this closed. Currently in a planned OD, I am wary of paying this off as if she still has access to the account there would be nothing stopping her transferring the money to her own account, leaving me out of pocket (would not put this past her).

In order to improve my credit score I see a lot of talk about getting a credit builder credit card, making small purchases each month and having a DD set up to pay the balance in full. I am just not sure if now is the best time to do this. Should I wait until my current Barclaycard is paid off in full, and then just use that for small purchases? Or should I still look at getting a credit builder CC to start using now?

Ebe_Scrooge

Using a credit card regularly and paying it off in full every month will improve your credit history - please ignore your score, it's totally meaningless. So looking at that in isolation, you've no need to take out a new card, just keep using the one you've got.

However, there are several things you've mentioned that will be making your history less than favourable. Firstly, only paying the minimum each month is viewed by many lenders as a sign of financial hardship. Secondly, any defaults will remain on your file for 6 years, and will also count against you. Thirdly, constantly using an overdraft is another negative marker on your file.

So there's little point in applying for another card in your situation. You need to sort out the bank account - pay off the overdraft and ensure your ex can't access the account - this may mean closing it and applying for another one in your name only. Then you need to go all-out to pay off the existing Barclaycard debt. Once this is done, continue to use it for day-to-day spending, but always ALWAYS pay it off in full every month. Over time this will start to improve your credit history, and as you start to build up a history of responsible repayment the effect of the arrears will start to diminish.

In the meantime, I'd think again about a new PCP or lease - that implies a fairly newish car ? You'd be much better off saving up now, then when your current deal finishes you can buy a decent used car for much less money. You'd be far better off putting that money towards clearing the credit card and overdraft than splashing out on a fast-depreciating chunk of metal.

PRAISETHESUN

As above ignore your score - it pays no role in creditworthiness. Instead focus on improving the contents of your credit file. The defaults will stay on your file for 6 years so there isn't too much you can do here, although the fact they they have been fully settled is generally seen by lenders in much better light than unpaid debt. Keeping your existing cards open and using them responsibly is all you need to do to demonstrate you can manage credit responsibly - there is no need to take out any new credit to do this.

The joint account is an important issue however that you should address. I'd contact your bank ASAP and say that the joint account is in dispute. Otherwise your ex can do as you so rightly fear and max out the overdraft, leaving you jointly liable for the debt. Don't make any payments towards that debt until you have confirmation that the joint account will require both signatories in order to make withdrawals. They won't let you close the account whilst it is in debt but once this is settled then you should be able to either close the account, or at the very least have yourself removed as a joint account holder leaving your ex to deal with closing it.

tim89

Thank you both for the responses, very helpful!

For the situation with the car, I think I will consider just buying outright at the end of the agreement, and save the money I would have been paying each month instead.

As for the joint account, I am looking into solutions for this. I did a live chat with my bank about it and asked about the options. Removing the ex from the account is going to be a no-go, as it requires us both to attend and appointment. I inquired about putting a block on the account, so money can be paid in but not taken out, this option is not possible. So I will need to clear the OD before anything else can be done. Though I will give them a call, the adviser I chatted with said certain life events such as this can mean the bank can sometimes help, though he didnt go into detail on this.

I am now going to focus on getting the account sorted, and then paying as much as I can each month off the credit card. Get the balance to zero and then put small transactions on each month and paying in full.

PRAISETHESUN

tim89 wrote: »

As for the joint account, I am looking into solutions for this. I did a live chat with my bank about it and asked about the options. Removing the ex from the account is going to be a no-go, as it requires us both to attend and appointment. I inquired about putting a block on the account, so money can be paid in but not taken out, this option is not possible. So I will need to clear the OD before anything else can be done. Though I will give them a call, the adviser I chatted with said certain life events such as this can mean the bank can sometimes help, though he didnt go into detail on this.

I am now going to focus on getting the account sorted, and then paying as much as I can each month off the credit card. Get the balance to zero and then put small transactions on each month and paying in full.

https://www.lloydsbank.com/help-guidance/for-your-next-step/divorce-separation/value-of-a-financial-checklist/default.asp

I would personally say that a relationship split is a big life event, so I would push harder for the account to be frozen. Make a formal complaint saying that the account is in dispute and that you want it to require both signatures to authorise any transactions. I appreciate that getting both of you to attend a branch is going to be very unlikely so even if you are unable to close the account, you should at least remove the possibility of getting dragged further into debt. You don't want to be partway through paying off the overdraft only for your ex to come in and max it back out again.

Once in credit again, there is no reason why they should refuse to then subsequently remove you from the account. Make sure to ask them to remove yourself rather than trying to remove your ex. The account will remain open but solely in their name, making it their problem moving forward and removing any further liability they might cause to you.