How to use credit card properly to improve credit score

Froggy8

Hi guys

Just got a vanquish card and limit is £600.

I have read 2 stories about using a credit card, one is pay all in one month and other is pay bit by bit every month to show lenders I can pay monthly without missing a month.

What do you guys do with your credit card please?

I did have a credit card when I was young and needless to say I was not sensible with it.

Many thanks 😊 

eskbanker

Don't focus on a fictitious 'score' that no lender will ever see, but in terms of building credit history with a credit card, use it every month and pay off in full after every statement.

pdel61

Use the card each month, don't go near the limit and pay it off in full each month.

MorningcoffeeIV

Froggy8 said:

Just got a vanquish card and limit is £600.

Also, it's Vanquis.

Unless you're Sean Connery.

DullGreyGuy

The score you see on Experian etc arent used by lenders

Every lender has their own rating system which is applied to your credit history. Each lender is free to decide if it prefers customers with a sitting balance or those that pay it off in full each month. There is anecdotal evidence that AmEx are more negative to outstanding balances than say Barclays but you cannot determine from that the Barclays prefer it, just they are less negative towards it. 

Personally would go spend as you need to (dont spend for the sake of trying to massage your history), keep comfortably within the limits and pay off in full each month. The interest Vanquish will charge on an outstanding balance will be much worse than the impact on your credit score

CliveOfIndia

I'll echo the above, ignore your score completely.  But to build up a good credit history (which is what counts), use the card for planned, essential purchases, stuff you would have bought anyway, and always pay in full every month without fail.  Never spend more than you can afford to repay in the vain hope of somehow making yourself look better to lenders.

Always pay in full every month (unless you're on a 0% promotion).  You'll hear some people saying you need to keep a balance and pay interest to keep the lenders happy, but that's rubbish - as long as you use the card regularly, they'll make plenty of money out of you (indirectly) from the fees they charge the retailer every time you use it.  There is absolutely no need to be paying any interest.

Froggy8

Thank you very much guys.

Apologies, I meant improve my credit report as I already know the number is not important.

Just one problem I havent mentioned, I am on a very low income.

I was planning on if I only did, let's say, 50 pound then I will pay it all off in 1 month but if its something like 150 pound then I could pay 75 in 2 months to pay it off.

How does that sound?

Many thanks again for the brilliant advices.

eskbanker

Froggy8 said:

Just one problem I havent mentioned, I am on a very low income.

I was planning on if I only did, let's say, 50 pound then I will pay it all off in 1 month but if its something like 150 pound then I could pay 75 in 2 months to pay it off.

How does that sound?

It sounds like that wouldn't improve your credit history as much as possible but it may be the most pragmatic action if you feel the need to spend £150 that you can't afford to repay in full in one month, i.e. if you're really needing the ability to carry a balance from one month to another then that might take precedence over a desire to improve your credit status....

CliveOfIndia

Froggy8 said:

 I am on a very low income.

I was planning on if I only did, let's say, 50 pound then I will pay it all off in 1 month but if its something like 150 pound then I could pay 75 in 2 months to pay it off.

How does that sound?

Never spend more than you can repay.  Especially if you're on a low income, the last thing you need is to be paying interest.  Just stick to what you can afford to repay in full.  If you spend £150 and take 2 months to pay it off, you'll have to repay more than the £150 as you'll be charged interest.  And if you make further purchases on the card in the meantime then you're caught in the vicious cycle of never clearing it and getting charged ever-increasing amounts of interest.

Keep it simple - spend only what you can afford and always repay in full.

Froggy8

You saying it will hurt my report if I pay it all in 2 months?

eskbanker

Froggy8 said:

You saying it will hurt my report if I pay it all in 2 months?

Depends how you define 'hurt' but paying off in full every month is best, and anything involving carrying a balance over and paying interest will be seen as negative, even if not very negative....