Is taking a loan to improve credit score a sensible idea?

Mars_Robertson

TLDR: Is taking a loan to improve credit score a sensible idea?

Situation and the steps taken already:
- got statutory poor credit score, £53 unpaid from 2017
- closed some unused credit cards to reduce my credit limit
- started using another card (Visa) so that my repayment is reflected (AmEx does not show up in my credit report)
- signed up LoqBox to build my credit score
- Electoral Roll obviously, contemplating getting a landline (concerned about privacy implications)

1. I called my bank.
2. Told them: "you see how much I earn, I can afford the loan, can you lend me some money"
3. The bank sent me the paperwork, I've returned the paperwork, I have money in my bank account.
4. Fourteen days "cooling off" period, I can simply return the loan

I have enough discipline not to spend on hookers and coke, the interest is "only" £200 but it could be worth it if it allows me to save £20000 in interest for the next 30 years.

Will that loan help me improve credit score and get a better mortgage a year from now?

Willing2Learn

Mars_Robertson wrote: »

Is taking a loan to improve credit score a sensible idea?

No. It is not a sensible idea to try and increase your 'credit score'. This is because mortgage lenders neither see nor use your 'credit score'.

What is the £53 unpaid from 2017 for?
Get yourself a landline. Keep the ER updated. And above all, demonstrate to a lender, through your credit account conduct, that you can be trusted with their money.
Keep using your credit card for monthly groceries and then pay the statemented balance in full each month.

Edit: You need to regularly check all three credit files for accuracy of data recorded.

[Deleted User]

Mars_Robertson wrote: »

TLDR:
Will that loan help me improve credit score and get a better mortgage a year from now?

Even if it increased your credit score, it would lower your chances of a mortgage.

PRAISETHESUN

In a nutshell: No.

There is no reason to pay to improve your credit history, either through credit (re)building services such as LOQBOX or through interest bearing loans. All you need to do is use a few credit cards every month to buy things you'd normally buy anyway, and pay the balance off in full. As above, ignore your "score" or "rating" as lenders do not see these and are not a metric of creditworthiness in any circumstance - the main focus is to demonstrate through good *credit history* that you can manage credit responsibly.

Ben8282

Mars_Robertson wrote: »

TLDR: Is taking a loan to improve credit score a sensible idea?

Situation and the steps taken already:
- got statutory poor credit score, £53 unpaid from 2017
It is unclear what you mean by this but I assume you paid it. Was the account defaulted? This is probably the one and only thing that was wrong with your credit files.
- closed some unused credit cards to reduce my credit limit
Why? What do you expect to achieve by this?
- started using another card (Visa) so that my repayment is reflected (AmEx does not show up in my credit report)
Amex probably shows up on a different CRA as you don't say which one you have checked but nevertheless the principal of what you have done is sound
- signed up LoqBox to build my credit score
A somewhat foolish thing to do. Suggest you cancel the Loqbox ASAP. How much of your money are you giving them to hold without paying you interest and then charge you to get refunded when the year is up? How much is the loan and debt from loqbox now showing on your credit files that you are repaying?
- Electoral Roll obviously, contemplating getting a landline (concerned about privacy implications)
What privacy implications are there in getting a landline? Or do you mean privacy implications of being on the ER? Surely you are on the ER if you have an Amex, Visa card and the other cards that you closed already?

1. I called my bank.
2. Told them: "you see how much I earn, I can afford the loan, can you lend me some money"
Did you really speak to them like this? Most people would have simply completed an application form. How did they respond to this approach?
3. The bank sent me the paperwork, I've returned the paperwork, I have money in my bank account.
4. Fourteen days "cooling off" period, I can simply return the loan
What do you hope to achieve by this?
if you cancel the loan it will be as if it never existed.
Keeping the loan will just add to your debt so you will have lots of debt to be repaying (the bank loan and the loqbox) which will decrease your ability to obtain credit until they are repaid.
If you are able to obtain a loan from your bank in this way then WHAT DO YOU IMAGINE IS ACTUALLY WRONG WITH YOUR ABILITY TO OBTAIN CREDIT?

I have enough discipline not to spend on hookers and coke,
Pleased to hear it
the interest is "only" £200 but it could be worth it if it allows me to save £20000 in interest for the next 30 years.

Will that loan help me improve credit score and get a better mortgage a year from now?

See above comments.
Your credit score is meaningless and no mortgage lender will see it let alone take it into account when making a decision regarding your mortgage application.

[Deleted User]

No it won't.

A. Your score isn't used in lending decisions and B. a loan looks to lenders that you cannot afford day-to-day living within your means.

Amex should show across all 3 of your credit reports.

And you've shot yourself in the foot getting LoqBox.

Mars_Robertson

Loads of comments.

Impossible to reply one-by-one.

I will return the loan then, still within the "cooling off" period, no harm done.

LoqBox seem totally harmless to me. What's wrong with them? The opportunity cost of earning 1% per anum on £20 per month? Negligible...

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contemplating getting a landline (concerned about privacy implications)

It feels to me that Electoral Registry data is behind a paywall - need to buy it first - the phone book (landlines) are completely free of charge. I don't want a random ######### (EDIT: some bad things happen to me). Privacy online applies to real life too.

"you see how much I earn, I can afford the loan, can you lend me some money"

That's exactly what I said. I know my credit score is low. So I was expecting my application would be rejected (£700 iPhone some time ago was rejected) but £7000 (the loan I'm talking about) was approved.

Ben8282

You can have your landline number ex directory. And I believe the comment made by yourself regarding an individual googling your name to be offensive and inappropriate and would suggest that you delete it.

Hoolay88

AS others have mentioned just stick with using credit cards to buy things each month that you would be buying anyway and pay the statement off in full each month.

This will improve your credit score.

[Deleted User]

Hoolay88 wrote: »

AS others have mentioned just stick with using credit cards to buy things each month that you would be buying anyway and pay the statement off in full each month.

This will improve your credit score.

Actually, “others have said” to ignore the score altogether.

Takmon

Mars_Robertson wrote: »

I will return the loan then, still within the "cooling off" period, no harm done.

Well you will still have a credit search on your file which is a slightly negative factor when applying for more credit, luckily these drop off after 12 months.

Just think before you apply for anything else in the hope of improving your "score".