Credit Repair becomes downfall???

gavin2121

Evening All,

Over the past few years, I have taken advantage of the multiple Credit Cards offered to me under the premise of Repairing My Credit Score.... however, it would appear that in doing so, i have inadvertently reduced my affordability score due to the amount of credit available, even if I have not used it.

Am i right in thinking that it would be better to close these dormant accounts and reduce my available credit in order to improve my affordability rather than storing credit that i dont use??

 

MorningcoffeeIV

LOL. Your affordability and credit scores are meaningless. 

Lenders look at how you manage your credit. Use your cards, clear in full, ignore your scores and horoscope.

gavin2121

So I'm better off utilising the credit and paying it back to demonstrate reliability?

Does it have to be in full or do they like to see regular payments?

Also, would it be better to reduce my available credit down to say just one card and manage that well.... rather than make minimal payments across multiple cards?

MorningcoffeeIV

Always in full.

If you don't clear in full, you show lenders you're living beyond your means.

Closing all cards but one will indicate that other lenders don't trust you - or you don't trust yourself. Keep them.

gavin2121

Thank you... i will now clear both cards in full each month.

I intentionally made minimum payments in order to demonstrate regular funds/trust....

 

  

MorningcoffeeIV

gavin2121 said:

I intentionally made minimum payments in order to demonstrate regular funds/trust....

A terrible strategy, unless on a 0% promo.

Ebe_Scrooge

MorningcoffeeIV said:

gavin2121 said:

I intentionally made minimum payments in order to demonstrate regular funds/trust....

A terrible strategy, unless on a 0% promo.

Agreed.  If you've got a 0% promotional rate then it's fine to make only minimum payments.  The fact that you've got a promotional rate is flagged as such on your credit report, so only making minimum payments is expected behaviour.

But for an ordinary interest-bearing card, paying only the minimum is absolutely the worst thing you can do.  Firstly, you'll be charged interest each month.  Secondly, prospective lenders can see you you're only making minimum payments, so will draw the conclusion that you're struggling to meet your obligations in terms of debt repayment.

Keep your cards open, use them regularly for everyday expenses (food, petrol, whatever) and ALWAYS repay in full every month without fail.  This demonstrates to lenders that you're borrowing responsibly and repaying what you owe without struggling - it also means you won't pay any interest.

You don't even have to use every card every month.  If necessary you can use one card one month and another the next.  Whatever you do, don't spend on the card just for the sake of it.  Only buy stuff you need and can afford.  It's largely irrelevant how much you spend on the card, the important thing - and I can't stress this enough - is to always repay in full every month, without fail.

You can ignore your meaningless score.  You can also ignore your "affordability" or "percentage utilisation" ratings - so long as you're repaying in full every month, these are irrelevant.

penners324

You're paying lots of interest unnecessarily.

PRAISETHESUN

Agree with the comments above - there is no need to ever pay a single penny in order to (re)build good credit history. Paying off cards in full every month demonstrates that you can be trusted with credit and will serve to improve your creditworthiness in the eyes of other lenders. The affordability issue is a separate one and every lender is different. You won't ever get to find out their criteria, so I personally wouldn't worry about it too much.

MalMonroe

Hi, have you checked your credit reports recently? Just wondering as you say "it would appear that in doing so, I have inadvertently reduced my affordability score due to the amount of credit available, even if I have not used it" -  as if you have only just become aware.

If you haven't checked them, it might be a good idea to do so. The ones from Experian, Equifax and TransUnion.

I agree with what the others have said above. Plus, as suggested, it's a good idea to follow Martin's advice - pay off your credit cards IN FULL every month. (He said it again on TV this week).  Obviously if you've got a 0% balance deal it's not as crucial but lenders need to know that you are financially capable. As we know, credit scores are meaningless, nobody else ever sees them. Lenders don't like it if you are using a lot of your available credit. In my own experience, some say 25% is bad others say 30% - so just be aware of that, too.

Don't ever pay unnecessary interest. That was my big mistake before I woke up and smelled whatever. I used to think that £20 a month interest on one card wasn't bad! What a fool. I had three credit cards and was paying over £100 per month between them just in interest. Talk about head in sand. I never had a hope of paying any of them off. That's when I heard about StepChange (CCCS as it was then) and was rescued. Now I'm far more savvy, thank goodness. You can be, too.