Just taken out a credit card and credit score went down?

edited 30 November -1 at 1:00AM in Credit File & Ratings
16 replies 1.1K views
thomas812thomas812 Forumite
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edited 30 November -1 at 1:00AM in Credit File & Ratings
Hey all,

I just took out my first credit card 2 weeks ago from Barcleys. I used it for £160 of stuff and paid it off instantly. However I just got my new credit report and my score went down 32 points..

I am young however have never missed a bill, and I thought responsible usage of a credit card would boost my score, but it hasn't?
I didn't take out a credit card because I wanted to pay things with it, I could easily put it all on my debit but I wanted one purely to boost my Score slowly.

Any reasons for this? I don't understand..


Thanks.
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Replies

  • Edi81Edi81 Forumite
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    You don’t have a universal credit score in the UK.
    If you are paying for a mythical score then cancel it!
  • MovingForwardsMovingForwards Forumite
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    Because your credit score means nothing over here and is not seen / used by financial institutions as they have their own criteria for lending.

    Why are you paying the CC off instantly if you want to build credit history and show you are able to borrow money and pay it back on time? You need to wait for the statement to come out and then pay the bill, better still have a direct debit set up to pay the full balance each month.
  • thomas812 wrote: »
    Hey all,

    I just took out my first credit card 2 weeks ago from Barcleys. I used it for £160 of stuff and paid it off instantly. However I just got my new credit report and my score went down 32 points..

    I am young however have never missed a bill, and I thought responsible usage of a credit card would boost my score, but it hasn't?
    I didn't take out a credit card because I wanted to pay things with it, I could easily put it all on my debit but I wanted one purely to boost my Score slowly.

    Any reasons for this? I don't understand..


    Thanks.

    Because you've made a recent application for credit?

    Because you are now exposed to a greater line of credit available to you?

    Could be all sorts of reasons. You'll need to look at the credit file records on which score was decided to try and work out what it was.

    But, if I were you, I would be much more concerned that Barclaycard sent you a credit card bill within just 2 weeks of you opening the account :eek:

    :cool:
  • fatbellyfatbelly Forumite
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    You did the right thing. Advice to set up a d/d is good, but another way is to set it up for the minimum payment (to avoid missing that) and then make the remainder manually.

    Make sure you're on the electoral roll, have a bank account not overdrawn and you're on the way to being viewed positively should you need to be credit checked.
  • maxximus75maxximus75 Forumite
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    Getting a credit card is a good way to start your credit history, not the mythical score that doesn't really mean anything.


    The reason for this "score" that you are looking at to drop is because whenever you make an application for credit, the score will generally drop for a few months. This is absolutely normal behavior for these mythical scores.


    If your intention is to use your card throughout the month and then pay in full each month, then the best way (and recommended) is to set up with your credit card provider, the direct debit to pay in full after statement.


    I know when you first start out with credit, you want to pay it off shortly after but by letting yourself receive a statement each month with a balance and then have it pay in full, every month, this reports to the credit bureaus and shows you are borrowing and able to repay rather than showing a zero balance, every month.


    If you are disciplined, use your card for everyday things as you would your debit card. You will slowly start to build your credit history and no doubt, your "score" will also start to improve.


    Good luck!
  • thomas812thomas812 Forumite
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    Because your credit score means nothing over here and is not seen / used by financial institutions as they have their own criteria for lending.

    Why are you paying the CC off instantly if you want to build credit history and show you are able to borrow money and pay it back on time? You need to wait for the statement to come out and then pay the bill, better still have a direct debit set up to pay the full balance each month.

    I was thought to believe that a lot of financial situations depended on your credit score and how good you are with money, hence I got a credit card to show that I can borrow money and pay it back.
    I didn't realize I should wait for the statement, I just paid it early because I could. Now that I know that I will wait for the statement next time, thanks!
    visitere wrote: »
    Because you've made a recent application for credit?

    Because you are now exposed to a greater line of credit available to you?

    Could be all sorts of reasons. You'll need to look at the credit file records on which score was decided to try and work out what it was.

    But, if I were you, I would be much more concerned that Barclaycard sent you a credit card bill within just 2 weeks of you opening the account :eek:

    :cool:

    So my "credit" score before was essentially nothing as they had no way to figure out how reliable I am and now that I have a credit card, they can now actually keep track of my spending and reliability/trust? Interesting.
    fatbelly wrote: »
    You did the right thing. Advice to set up a d/d is good, but another way is to set it up for the minimum payment (to avoid missing that) and then make the remainder manually.

    Make sure you're on the electoral roll, have a bank account not overdrawn and you're on the way to being viewed positively should you need to be credit checked.

    People around me told me to start building up a good reputation/score whilst I am young, so I took out a CC in the idea to boost it and pay it back in FULL every month. I will setup a d/d and hopefully that'll sort things out.

    I am on the electoral roll and am very good at paying my bills on time (never missed one)
    maxximus75 wrote: »
    Getting a credit card is a good way to start your credit history, not the mythical score that doesn't really mean anything.


    The reason for this "score" that you are looking at to drop is because whenever you make an application for credit, the score will generally drop for a few months. This is absolutely normal behavior for these mythical scores.


    If your intention is to use your card throughout the month and then pay in full each month, then the best way (and recommended) is to set up with your credit card provider, the direct debit to pay in full after statement.


    I know when you first start out with credit, you want to pay it off shortly after but by letting yourself receive a statement each month with a balance and then have it pay in full, every month, this reports to the credit bureaus and shows you are borrowing and able to repay rather than showing a zero balance, every month.


    If you are disciplined, use your card for everyday things as you would your debit card. You will slowly start to build your credit history and no doubt, your "score" will also start to improve.


    Good luck!

    Brilliant reply, thank you!

    That is exactly what I want to use my credit card for, and now that you said when you take out a credit card it automatically goes down and is normal behavior makes me feel better.
  • zx81zx81 Forumite
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    It's important to ignore your score at all times, but especially when you're starting out with credit, as it will drop with any change.

    Open a card, score drops.
    Close a card, score drops.
    Run up a balance, score drop.
    Clear the balance, score drops.
    Put up your Christmas tree in November, score drops (although that one is deserved).
  • thomas812thomas812 Forumite
    25 Posts
    10 Posts
    zx81 wrote: »
    It's important to ignore your score at all times, but especially when you're starting out with credit, as it will drop with any change.

    Open a card, score drops.
    Close a card, score drops.
    Run up a balance, score drop.
    Clear the balance, score drops.
    Put up your Christmas tree in November, score drops (although that one is deserved).

    Interesting.. I'm not too bothered by it right now, but in a few years when I want to buy a house & another car, I'd like to have a good/exeleent score to get lower APR's and higher chances of loans etc..
    Oh well, at least I don't put Christmas decorations up before December then :rotfl:
  • zx81zx81 Forumite
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    thomas812 wrote: »
    I'd like to have a good/exeleent score to get lower APR's and higher chances of loans etc..

    A higher score won't give you lower APRs. Bankrupts and 18 year old have high scores but they don't get low rates (or any rates).

    You need to demonstrate good credit behaviour to get low rates.
  • yksiyksi Forumite
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    You'll hear around here all the time that the score "means nothing". It's not quite true... you will clearly see that it reacts to new things appearing on your credit history, but it is only an indicator for you. The credit agencies know that humans like pretty numbers, and get stressed when they drop and get excited when they rise. That number is designed to make you think that if you pay them for a special service they can help you with your credit history.

    That part is balderdash. Feel free to keep an eye on the number if it makes you feel better, but it's much more effective to be aware of how certain behaviour affects the way lenders see you. If the number drops slightly, ignore it. If it falls dramatically, find out why (as you have done here).

    Your big aims right now are going well. Use the card every month, hopefully under a quarter of your limit, wait until the statement comes before you pay it off. The card issuer reports on your report each month and it will show what your balance was, what you repaid, and the fact you're in good standing with them (green tick). When they offer you a limit increase, accept it (but there's no need to spend more).

    Watch your applications for credit (including finance for anything, anything buy-now-pay-later, anything interest-free, and stuff like mobile or internet contracts, and pay-by-the-month insurance), if you apply for anything at all that says it will do a hard credit check, stop and think first, see if you can use a "comparison site" instead as it will only pop one search onto your files, not one for every lender. One or two applications at once are fine. Five in a row and other lenders will think you're in money desperation. Either way, they'll eventually fade off your history and matter less as time goes by. Nothing is ever the end of the world on a credit history!
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