Using Credit Card to Improve Credit Score

corkyefes

Afternoon,

I've been using my credit card to try and improve my credit score.

For example, I have been spending about £75 a month on it for fuel and then paying it off in full when the statement comes in (comes in on the 15th of the month).

My friend said that I shouldn't be waiting for the statement to come in and that i should be paying the balance off before the statement, thus not incuring any interest.

What is the best thing to do to improve my score?

I thought that if I paid it off before the statement, credit scorers wouldnt be able to tell ive been using it, this is why i always wait for the statement and pay about £5 interest.

Help appreciated.

Barkin

corkyefes said:

this is why i always wait for the statement and pay about £5 interest.

???

Which card is this? 

Normally if you pay the full statement amount, before the "payment due" date, you shouldn't incur any interest...

By paying off any spending before it's on your statement, you're missing out on the interest free period... 

corkyefes

Barkin said:

corkyefes said:

this is why i always wait for the statement and pay about £5 interest.

???

Which card is this? 

Normally if you pay the full statement amount, before the "payment due" date, you shouldn't incur any interest...

By paying off any spending before it's on your statement, you're missing out on the interest free period... 

Yes, what im saying is that if i pay it off before the statement date, i dont incur any interest, but my friend said this is what I should be doing to improve my credit score.

I always thought i needed to incur interest and then pay it all off in full, to improve my score.

BoGoF

Surely you mean to improve your credit history and not the make believe 'score' that the Credit Reference Agency give you.

But as above if you are clearing your statement balance in full by the due date then there should be no interest.

CliveOfIndia

As above, ignore your score, it's a good history you need to be building up.

There seems to be some confusion on the part of your friend about how interest works.  The correct way to use a credit card is to wait for the statement to arrive, then pay it in full before the "payment due" date.  This is typically around 3 weeks after the statement is produced, and will be clearly printed on the statement.

As long as you pay the full balance (not a penny less) at some point between getting the statement and the payment due date, you won't pay any interest.  It's safest to set up a Direct Debit for the full amount, then you'll never forget (for instance, if you happen to be away on holiday or something when the payment is due).

corkyefes said:

I always thought i needed to incur interest and then pay it all off in full, to improve my score.

Absolutely, definitely NOT !  There is no need to ever pay interest on a credit card - and even if you do pay interest, it won't make a blind bit of difference to your credit history.

corkyefes said:

I thought that if I paid it off before the statement, credit scorers wouldnt be able to tell ive been using it

This is correct - if you pay it off before the statement is generated then it looks like you're not using it (since each statement will report a zero balance).  Not the end of the world as such, but you're missing out on the chance of building up a favourable credit history.

corkyefes said:

this is why i always wait for the statement and pay about £5 interest.

But this part is incorrect.  Yes, wait for the statement to be generated, but you won't pay any interest as long as you pay in full before the due date.

(The only exception to this might be if you use the card for cash withdrawals, of a cash-like transaction such as buying foreign currency.  But for ordinary bog-standard purchases like food or petrol, you won't pay any interest as long as you always pay in full).

Nasqueron

Firstly, there is no such thing as a credit score in the UK, all that matters is credit history
Secondly, paying off the card less than 100% and paying interest is bad as it actually harms your credit history as it appears you are not able to pay the card in full i.e. not a good risk for lenders

Your friend is probably one of these who mistakenly believes a customer is only attractive to lenders if they pay interest each money to earn the bank money. In reality, banks want to lend to people who show good credit history of borrowing and paying debts on time - pay your card in full every month by direct debit and just keep that going for a few years 

born_again

corkyefes said:

Afternoon,

I've been using my credit card to try and improve my credit score.

For example, I have been spending about £75 a month on it for fuel and then paying it off in full when the statement comes in (comes in on the 15th of the month).

My friend said that I shouldn't be waiting for the statement to come in and that i should be paying the balance off before the statement, thus not incuring any interest.

What is the best thing to do to improve my score?

I thought that if I paid it off before the statement, credit scorers wouldnt be able to tell ive been using it, this is why i always wait for the statement and pay about £5 interest.

Help appreciated.

If you are carrying a balance from a previous statement, then you will be paying interest from the date of the transaction. So in that case paying something pre statement can help.

If you pay in full each month, then do not pay till you get the statement. You are defeating one of the benefits of a credit card the interest free period.

So long as you pay the FULL statement balance by the due date on the statement, you will not be charged interest. Unless it is a cash payment such as using ATM & some other transactions..

Stop thinking about credit score, no lender ever see's them. It is a made up figure by the CRA's as marketing hype.

Credit history is what counts, so paying on time & not missing payments.

Your friend needs to study how credit cards work, as they  appear to be way off the mark in their understanding.

400ixl

Credit score is fictitious and you should just ignore it.

Lenders will be looking for people who have a good history of no missed payments and do not have too much overall debt.

So it makes no difference if you pay off the second you spend on the card, at the point you get the monthly statement. You don't need to be waiting for any interest to be chargeable, you should be avoiding that.

If your friend is saying wait until interest is applied then they are a muppet and you need to be a) ignoring them and b) if you actually like them, then correcting them in case they are following their own advice. 

Barkin

corkyefes said:

Barkin said:

corkyefes said:

this is why i always wait for the statement and pay about £5 interest.

???

Which card is this? 

Normally if you pay the full statement amount, before the "payment due" date, you shouldn't incur any interest...

By paying off any spending before it's on your statement, you're missing out on the interest free period... 

Yes, what im saying is that if i pay it off before the statement date, i dont incur any interest, but my friend said this is what I should be doing to improve my credit score.

I always thought i needed to incur interest and then pay it all off in full, to improve my score.

I'm confused.

You said:

---x---
this is why i always wait for the statement and pay about £5 interest
---x---

Don't pay anything until you get your statement. Interest free loan.

When you get your statement, pay it IN FULL before the due date. No interest incurred. 

Don't worry about your credit score. 

corkyefes

Thanks all for your help...

My statement is due in the 15th, so i will wait for that and pay it off in full before the payment date of the 23rd.

Appreciate everyones advice and i will discuss this with my friend.

CliveOfIndia

corkyefes said:

Thanks all for your help...

My statement is due in the 15th, so i will wait for that and pay it off in full before the payment date of the 23rd.

Appreciate everyones advice and i will discuss this with my friend.

Spot on.

As mentioned earlier, setting up a Direct Debit really is by far the simplest way - you'll never forget, and the card company will make sure the payment is taken at the correct time.  When you set up the DD you'll be given the choice of "minimum payment", "fixed amount" or "full statement balance" - choose the "full balance" option.

Of course, it's then down to you to make sure there's money in your account to cover the DD !  But when you get your statement, it'll say "We will take a payment of £x.yy on <such-and-such a date>", so it's all there in black and white for you to see.