Rebuilding and Building Our Credit Score

badcreditdude

Hello All,

I'm looking for advise for my partner and I. 

1, Me
I have bad credit score 510. I did bad mistakes as young guy. As I couldn't pay I reached out to Payplan to manage my payments. I have paid off all my creditors now and my debt is at 0. 

I believe 3-4 creditors have defaulted me.

How can I improve my credit score? I don't really want to use credit any more for obvious reasons and I dont think there is a company that would lend me anyway.

Can you please support by sharing info on how I can rebuild my credit score

2, My partner
She never really took out credit, always bought everything for cash. Recently, she took a mattress and echelon bike on credit. Mattress is now paid off. Her credit score is 540.
What credit cards should she open to help her build the credit without paying too much interest?

Questions:
1, If we pay groceries with a credit card and pay the amount off next day, does that help towards building a trust? - Trying to avoid the monthly interest here
2, How can I rebuild my score?
3, How can she build her score?
4, Any advise when it comes to getting a mortgage?

Thank you in advance

born_again

Forget the score.
It is your credit history that counts, so ensure any bills are paid on time. 
Make sure you are on electoral roll etc.

Don't use a CC & then pay off next day. Pointless you are missing the selling point of a CC. Put the amount spent in a savings acc & then pay the CC in full when it is due. Won't make much interest. But is MSE 👍

As to Mortgage the more debt you are carrying the lower the amount that could be offered.
So if you take out several & have a large amount available credit, even if not used. It does not help your mortgage.

CliveOfIndia

To echo the above points ......

badcreditdude said:

I have bad credit score 510.

How can I improve my credit score?
Can you please support by sharing info on how I can rebuild my credit score

Don't worry about your score, it's just a marketing gimmick that is not used - nor even seen - by any lender.  It's your credit history that counts.

badcreditdude said:

I don't really want to use credit any more for obvious reasons

In that case, why are you worried about either your fictitious score or your genuine history?  But do bear in mind that "credit" means more than just a credit card.  Mobile phone contract, utility bills (if you're not on a pre-payment meter), paying for car or home insurance monthly, all these are examples of credit.

badcreditdude said:

1, If we pay groceries with a credit card and pay the amount off next day, does that help towards building a trust? - Trying to avoid the monthly interest here

This won't help.  You need to wait until the statement is generated then pay off the full amount.  If you pay off the spending immediately then, when the lender sends their data to the CRA, it looks like you're not using the credit card.  Actually, you also run the risk that the transaction has not hit your account immediately, so you may end up thinking that you've paid off the transaction when you haven't.  As long as you repay the full statement balance each month when the statement arrives, you won't be charged any fees or interest.

badcreditdude said:

4, Any advise when it comes to getting a mortgage?

Aside from the actual mechanics of shopping around for the best deal, you need to show a solid history of using credit responsibly, borrowing within your means and always repaying what you owe.  A solid history will improve your chances of securing a decent deal (all other things being equal).

Correct use of a credit card is one way of doing this.  Use if for planned, budgeted purchases (food, petrol, whatever).  Wait for the statement to arrive, then pay the balance in full before the due date (typically around 3 weeks or so from when the statement is generated).  Ideally set up a direct debit for the full statement balance.

As long as you are disciplined, a credit card can be a very useful financial tool.  The problems only arise if you go out using it to buy things you can't afford - then you find yourself unable to pay it off at the end of the month, which will mean you pay interest, as well as defeating the whole object of using it to improve your credit history.

Kartalweb

Here’s some quick advice:

• Check your credit report for accuracy.
• Use a credit builder card for small purchases, paying it off fully each month.
• Avoid applying for new credit unnecessarily.

for your partner

• Consider a low-interest credit card designed for building credit.
• Paying off groceries with a credit card and clearing the balance immediately can help improve credit scores.

• Work on improving your credit scores before applying for a mortgage to get better rates.

Hope this helps!

CliveOfIndia

Kartalweb said:

• Consider a low-interest credit card designed for building credit.

Just to clarify a couple of points.  Credit-builder cards do, by their very nature, tend to have high interest rates compared to mainstream cards - there's no such thing as a low-interest credit-builder card.  But as you'll be repaying in full every month, it makes no difference what the APR is as you won't be incurring any interest.

Kartalweb said:

• 
  
• Paying off groceries with a credit card and clearing the balance immediately can help improve credit scores.

Paying off transactions immediately will do nothing to improve either your meaningless score or your more relevant credit history, as has already been stated previously.

Kartalweb said:

• Work on improving your credit scores before applying for a mortgage to get better rates.

Again, please read previous comments - the score is absolutely meaningless.

Whilst I'm sure your advice is well-intentioned, please try not to give misleading advice - it is not at all helpful to the OP.

badcreditdude

Hello All,

Thank you very much for your insight. 

Now I understand the credit score is not so important rather then the history. 
My point here is my history is bad and the defaults will remain on my account for 6 years. 

How do I go from here in order to be able to apply for mortgage within next 1-2 years

I do pay for phone and house bills all on time but I feel like this will not help so much

What about steps for my partner?
So open low interest credit card, spend money on groceries wait for the bill to hit and then pay it fully?
Any other options?


Total aim here is to buy a house but I'm worried we wont be able to because
1, I have bad history
2, She has no history

Thank you all again

CliveOfIndia
 Kartalweb
born_again 

CliveOfIndia

Yes, you can ignore your score completely, and you're correct in that it's your history that counts.  Well, when you apply for any type of credit (including a mortgage), the lender will take into account a whole host of factors - your income, your outgoings, your current debt and your credit history being some of the major factors.

Yes, defaults will remain on your file for 6 years, there's nothing you can do about that.  But their impact will gradually diminish over time, especially if superseded by plenty of more positive markers.

To that end, the aim for both of you is to build up lots of positive history - and one of the simplest ways of doing this is just by using a credit card "correctly", as previously described.

And, also as mentioned before, don't worry about a "low interest" credit card.  With bad or no history, you're likely going to be limited to the so-called "credit builder" cards which typically have quite high interest rates ( https://www.moneysavingexpert.com/credit-cards/credit-builder/ ).  But as long as you always repay in full every month (which you absolutely MUST do), then the interest rate is immaterial.

Any form of credit agreement which you repay on time and in line with your agreed contract will improve your history.  A mobile phone contract will help, for instance, but you mustn't go out and spend money unnecessarily purely for the sake of your credit history.  That's why a credit card is easiest - you're only using it to spend money you would have had to spend anyway, and it'll cost you nothing.

Aside from doing what you can to build up a good history, make sure you're registered on the Electoral Roll, that's always a nice green tick in the eyes of a lender.  Also, and quite importantly, do everything you can to reduce or eliminate any current debt you're carrying.  When you make a mortgage application, the less debt you currently have, the better.  And at the same time, save as much as you can for a deposit - the more deposit you can put down, the better deal you're likely to be offered (all other things being equal).

Oh, and just to add.  Don't go making lots of credit card applications in a short space of time - lots of hard searches makes it look like you're desperate for credit, and makes lenders a bit jittery.  Use an eligibility checker first to get an idea of your chances - these don't leave a record on your credit file.  If possible, use a checker on the lender's own website, rather than a generic third-party aggregator.  Whilst still not a guarantee, they do at least know their own particular acceptance criteria, so tend to give a slightly more accurate indication of your chances of acceptance.

If and when you do apply for / get a new credit card, your credit score will almost certainly drop, since it's a change in your credit circumstances.  But guess what - that doesn't matter at all