Whats the best way to pay off CC to maximize benefit to credit rating

JosephHollindrake

Hi,

I recently bought a mountain bike for £3,000 (Yes I know, could have bought a car) using a credit card with 0% for 24months.
I also recently sold my bike for £1,500.

So I'm wondering, in order to best benefit my credit rating, is it better to:
a. make a payment £1,500 off straight away, then make monthly payments to pay the remaining £1,500 over 12months
or
b. put the £1,500 into savings to help make larger monthly payments, still most likely paying the full £3,000 balance off in 12months.

Thanks
Joe

[Deleted User]

Just make sure you clear it before the promo ends.

If you intend to apply for further credit beforehand, you might want to consider clearing it.

Sandtree

Why are you concerned about your "rating"?

There is no such thing as a credit score in 99% of situations (some insurers do use the basic score but its almost non-existent with real lenders). What credit agencies provider lenders really is data and the lender will make a decision based on that data, what they hold on you and what you tell them. 

Some companies won't care much at all about balances on a promotional rate whereas others will. I have an "unlimited" card from AmEx and have found most simply look at my average monthly spend on it whereas others run screaming for the hills.

If you are intending to apply for new credit you may want to consider reducing your debt but if you aren't there is no need to. Even if you are intending to apply for new credit the answer isn't clear cut... having a £20,000 limit and only £3,000 used gives you a low utilisation rate and so some will say "others trust you and you clearly are being sensible with a high limit" whereas others may say "what the f"£k happens if they go wild and max out the full £20k the day after we offer them a new credit line!?!"

coachman12

Remind me never to buy a bike, Joe.........
As nobody will be interested in your credit score, you can safely do either of the options you mention in the way that will suit YOU best.

MalMonroe

I'd follow Martin's advice which is to always pay off debts before even thinking about saving. I know it's 0% for 24 months but I'd pay off the bulk of it now and then just make regular monthly payments until it's paid off. Creditors will love you for it. And as others have said, credit scores are meaningless. But if you have credit and use it wisely, well, lenders love that.

Nebulous2

It really doesn’t matter. Do whatever suits you. As long as you make minimum payment every month. If you can keep the money aside you can earn a few pence interest on it and pay it in before the promotional rate ends. Or if you might be tempted to dip into it pay it in now. 

You’ve made a big mistake however. You could have bought a half-decent road bike for that price! 

MinuteNoodles

Set up a direct debit of 24 equal amounts to clear the card off by the end of the 0% deal. Don't lose interest you could have got by chucking a lump sum into it trying to improve a score that no lenders actually use.

goldieandblackie

Best advice is next time buy a cheaper bike as now you have sold it you've just lost £1500.

phillw

goldieandblackie said:

Best advice is next time buy a cheaper bike as now you have sold it you've just lost £1500.

I may be wrong, but the way I read it he bought a new bike for £3000 and sold his old one for £1500 & wants to know what is the best thing to do with the money.

coachman12

phillw said:

goldieandblackie said:

Best advice is next time buy a cheaper bike as now you have sold it you've just lost £1500.

I may be wrong, but the way I read it he bought a new bike for £3000 and sold his old one for £1500 & wants to know what is the best thing to do with the money.

Me too.

redpete

So I'm wondering, in order to best benefit my credit rating, ...

Better question is 'will it make a difference to me getting (a new loan/a mortgage/a phone contract/a credit card...) (tomorrow/next year/in 5 years' time)?
Answer could be 1) it will make no difference so not worth worrying about or 2) it might tip the decision against you in which case there are more important things contributing to the lender's assessment that you need to sort out.