Confused about why my monthly credit card spend is affecting my credit rating.

Jerry_Mander

Let's say I have a £1000 credit limit on my credit card and each month I spend £999 but pay £999 back before my statement is due so that I only ever have £0 as my final balance so no payment is due.

But each month my credit card provider is reporting to the credit reference agency that I am exceeding my credit limit. Can someone explain why this is as I don't understand why, if I am paying it all back before the statement date, I am being reported as exceeding my credit limit.

Also, I actually do this on three credit cards I have but only the one is reporting it as exceeding my credit limit. I have raised it as a dispute with Equifax but they say the provider says they are right and that's the end of the matter.

eskbanker

No idea why you'd choose to do that, but is it perhaps possible that your aggregate spend between statements exceeds your limit, e.g. if you make multiple repayments?

spinningsheep

Why are you paying the full balance off BEFORE the statement is issued? This would surely show zero utilisation? If the balance is zero at the point the statement is issued it would be physically impossible to exceed the credit limit, UNLESS, you have the date wrong about the statement generation date, and the trailing interest from the previous statement is then pushing over the limit if only very briefly, but enough that the reporting to the CRA is reflecting this?

Personally I'd just set up a DD, let the statements generate and forget about it like most folks do and that's problem solved 

CliveOfIndia

It does sound very odd - though the suggestion from eskbanker sounds very feasible.

Why do you repay the balance before the statement is produced?  It would be far simpler (and better for your credit history in the long term) if you simply pay in full when the statement arrives - a Direct Debit for Full Statement Balance makes it extremely simple and ensures you never forget to make the payment.

prettyandfluffy

My guess is that if you're clearing the balance before the statement date, you're also starting to spend again before the statement date.  The CC company is aggregating this spend with that which pre dated your payment.  If you need this additional credit and are also paying it off in full every month, it would be better to get a higher credit limit and make one payment per month as suggested above.

Jerry_Mander

eskbanker said:

No idea why you'd choose to do that, but is it perhaps possible that your aggregate spend between statements exceeds your limit, e.g. if you make multiple repayments?

I am careful not to exceed 70% of my total credit aggregated over the three cards (as suggested by Clearscore). But only this one card issuer is reporting me as being over my credit limit and I'm doing the same thing with all three credit cards (though not all at the same time as that would take me over). This is what confuses me most, that only one is consistently reporting it as exceeding my credit limit.

Jerry_Mander

spinningsheep said:Personally I'd just set up a DD, let the statements generate and forget about it like most folks do and that's problem solved 

Can you explain why that would help as I can't see the difference between paying it all off before the statement date and paying it off after it's been billed?

CliveOfIndia

Jerry_Mander said:

eskbanker said:

No idea why you'd choose to do that, but is it perhaps possible that your aggregate spend between statements exceeds your limit, e.g. if you make multiple repayments?

I am careful not to exceed 70% of my total credit aggregated over the three cards (as suggested by Clearscore).

If you always clear the cards in full then your percentage utilisation is irrelevant - you can usually ignore most of the advice given by the CRAs.  It's a different matter if you carry a balance from month to month, but hopefully you're not doing that?

Why not make life simpler for yourself?  Spend on the cards as normal, set up a DD to clear the full balance each month, request a higher limit if you need one (assuming you'll still be able to afford to clear in full if you make use of the higher limit).  It seems like you're making things unnecessarily complicated.

Jerry_Mander

prettyandfluffy said:

My guess is that if you're clearing the balance before the statement date, you're also starting to spend again before the statement date...

Nope, I pay it all off just before the statement is due so I have nil balance and then wait until the statement is generated and take more out then. I do understand what you are suggesting but I'm definitely not doing that.

Jerry_Mander

CliveOfIndia said:Why not make life simpler for yourself?  Spend on the cards as normal, set up a DD to clear the full balance each month, request a higher limit if you need one (assuming you'll still be able to afford to clear in full if you make use of the higher limit).  It seems like you're making things unnecessarily complicated.

I can see why you think it's making life complicated but really it isn't. It's no harder to pay it off in full before the statement date than to wait for it to be billed and pay by DD. There is a reason I do it this way but I'd rather not go into that. Suffice to say I really just want to know why it is being flagged as exceeding my credit limit so that I can take it to the ombudsman as it looks like that's where this is heading.

CliveOfIndia

Jerry_Mander said:

prettyandfluffy said:

My guess is that if you're clearing the balance before the statement date, you're also starting to spend again before the statement date...

Nope, I pay it all off just before the statement is due so I have nil balance and then wait until the statement is generated and take more out then. I do understand what you are suggesting but I'm definitely not doing that.

What do you mean by "take more out" - do you mean you use it for purchases, or you make a cash withdrawal?  If the latter then this may possibly explain it - it you're really close to your credit limit, the fees and interest may just be pushing you over the limit.

Irrespective, why not have a couple of months where you just spend on the card as usual then wait for the statement to arrive before paying in full?  That at least would give an indication as to whether it's some weird accounting glitch in their system.

Actually, thinking about it ... I wonder if it's a timing thing?  When you say you pay it just before the statement is due, do you mean when the statement arrives, or when it's generated?  There may be a few days difference between the two, particularly if you're receiving paper statements through the post.  Let's say there's a pending transaction of £10 that hasn't hit the statement yet, you then spend £999 on the card, you're then over the £1000 limit.  Unlikely, but there's an outside chance it could be something like that.