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Score dropped after recommended credit usage

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Hi all,

I'm pretty confused.

I've had a credit card for a few years but have only just started using it in the last 2-3 months.

It has a limit of £1k.

I use it for most things and pay it off gradually throughout the month.

I started using it to improve my score.

Near the end of the month I make sure I have £100 on it - so 10% of my credit utilisation ratio.

I have a very good score on all 3 credit companies - Experian for example is.... or was until today 983.  It's been this for about a year.

I was expecting it to rise but instead it's gone down to 968.

Not a happy bunny.

Does anyone know why this would be?  Maybe I'm misunderstanding something.

One thing I am thinking is..... am I being a moron?

  1. At the end of the month I make sure I have £100 showing for the credit agencies..... Maybe I'm sorting this too late - does anyone know what date Barclaycard send this info?
  2. So, when the month rolls over, I still have £100 in there - I essentially always have 100 in there.  Should I be paying off this £100?
  • I have a DD for the full amount set up but even though I have just over £100 used on the card, the DD is saying it will be collecting £0.

If anyone can help with all this that'd be great.

Thanks
«1

Comments

  • Peter999_2
    Peter999_2 Posts: 1,322 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    The credit score is just a made up figure by the credit reference agencies.    No lender gets to see your credit score and they follow their own rules as to whether they will loan you money.   You could have a "score" of 999 but earn £14,000 a year and struggle to get anyone to lend you money.    
  • elsien
    elsien Posts: 35,964 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 24 May at 12:59AM
    What financial institutions are interested in is your credit history and your affordability. So basically responsible use of your credit card and no late payments, not overstretched with other loans, no multitude of recent credit applications etc. 
    I’m not sure why you’re leaving £100 on it, which you are likely to be paying interest on, when paying it off in full every month equally shows a responsible use of credit. 

    All shall be well, and all shall be well, and all manner of things shall be well.

    Pedant alert - it's could have, not could of.
  • Dobbibill
    Dobbibill Posts: 4,191 Ambassador
    Part of the Furniture 1,000 Posts Mortgage-free Glee! Name Dropper
    Hi - Welcome to the forum.

    You have misunderstood the score. As above it's pretty useless.

    The only thing Experian should be used for with the score is if it dramatically drops to say 150, then check for fraudulent accounts opened in your name. Aside from that their score is as much use to you with lending as a score I may give you.
    Neither I nor Experian provide lending, therefore our opinions are pointless. 

    Continue to pay off your CC in full and on time every month. This is demonstrating good behaviour with current lending facilities you have, future lenders will look at your 'history' not your 'score'.
    I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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  • Martin_the_Unjust
    Martin_the_Unjust Posts: 1,070 Forumite
    Fifth Anniversary 1,000 Posts Name Dropper
    I’m not entirely convinced that paying it off in cribs and dabs through the month and then leaving £100 on it is actually demonstrating responsible credit worthiness.
  • Ayr_Rage
    Ayr_Rage Posts: 2,704 Forumite
    1,000 Posts Second Anniversary Photogenic Name Dropper
    Leaving a running balance is daft and the made-up score probably reflects that as it indicates that you are not paying it off in full every month.

    If you spend 10% of your available credit and clear it every time it'll look better not doing so and paying interest.

    The various CRAs may treat your usage differently, so don't rely on their numbers for anything, check the report details.
  • kimwp
    kimwp Posts: 2,911 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    Credit score aside, I am not sure why you are paying it off through the month and why you are leaving £100 on it at the end of the month?

    As you spend, the spends will get added to your account. At a certain point each month, everything on the account will get added to a statement/bill, which you will be asked to pay by a certain date. After this point, anything you pay into the account will go to paying off this bill. This will reduce the DD that is taken - which is why it is saying that the DD will take nothing.

    You don't need to make sure there is a certain minimum percentage of utilisation, really, the lower it is, the better.

    Set up a direct debit to pay the full amount (on the statement) off, make sure this amount is available in your current account at that time and that's all you need to do.
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • Otuama
    Otuama Posts: 12 Forumite
    Second Anniversary First Post
    edited 27 May at 9:33PM
    Hi all, thanks for the replies.

    As is apparent, I don't know what I'm doing or have taken in information wrongly.... or the wrong information.

    I now use the credit card as my default payment method.

    I read somewhere (or watched a video) that a good balance to be sent to CRAs is 10% of your limit - this is done near the end of the month.

    So, around the end of the month (let's say 24th), make a payment to bring your credit usage to around 10%. 

    So that's what I've been doing - and in order for me to keep track of my credit usage, every week I transfer what I've spent into another account  - so I don't think I have more money than I actually do.

    I've got a DD set up for the full amount but because I pay the CC off every so often, that's obviously eventually going to cancel the DD.

    And me keeping £100 in the account..... well, that's my bad (I'm a berk).  I did with the idea to always just pay the whatever I spend over the £100 target and near the end of the month I'll always have that £100 in there for the info to be sent to the CRAs..

    But, even though I'm not actually incurring interest on that, that's obviously having a detrimental effect.

    -------

    My question is this:

    Let's say I spend £400+ /mth on the credit card.  I leave that money in my current account (or transfer it to my temporary account until the end of the month).

    The direct debit is taken around the 28th.

    Clear Score received (or at least updated) my information on 27th
    TransUnion says the 30th
    Experian - I can't seem to find the date.

    If I wait for the DD to be taken, the information of my having a £400+ balance has already been sent to the CRAs

    So in their eyes I'm using 40%, not 10%...... which can have a detrimental effect on the credit score / report. 

     I can't seem to rack my head around this - Am I talking a load of bol***ks?  I can't tell nowadays.

    Thanks

  • kimwp
    kimwp Posts: 2,911 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    If you want your utilisation rate to be under 10% (which is a good idea), would it not be easier to spend less than £100 on it each month and keep your current account at £300 plus outgoings for the month (£200 buffer plus £100 to pay off your credit card bill by direct debit)? You are making it very complicated. I had the highest available scores for years just putting my petrol on one of my cards and paying it off with the direct debit (I only use the other for spends abroad or in case my main bank has technical issues). (Not that the score is used for anything, but it's a good indicator of how a credit card/loan company will view you)

    You could also see if they will increase the credit limit so that you normal monthly spend that you pay off in full is less than 10% of the limit.


    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • Nasqueron
    Nasqueron Posts: 10,646 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    kimwp said:
    If you want your utilisation rate to be under 10% (which is a good idea), would it not be easier to spend less than £100 on it each month and keep your current account at £300 plus outgoings for the month (£200 buffer plus £100 to pay off your credit card bill by direct debit)? You are making it very complicated. I had the highest available scores for years just putting my petrol on one of my cards and paying it off with the direct debit (I only use the other for spends abroad or in case my main bank has technical issues). (Not that the score is used for anything, but it's a good indicator of how a credit card/loan company will view you)

    You could also see if they will increase the credit limit so that you normal monthly spend that you pay off in full is less than 10% of the limit.


    Utilisation is irrelevant when paying the card off in full every month, lenders see you have spent on the card and paid off in full, lots of green ticks is good. The fake score might be affected by the utilisation numbers (though CRAs usually blather on about 25% or 30% not 10%)

    Note also that the score is NOT an indication of anything, it does not indicate how a lender will see you, a thin credit file could be 999 with monthly mobile payments on time but no lending history but lenders will be less likely than someone with a score of 700 but with extensive good credit history

    Sam Vimes' Boots Theory of Socioeconomic Unfairness: 

    People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.

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