3 Credit Cards - Very Poor Credit Rating - most effective way to improve it?

creditcardnewbie

Dear all,

I have a 'Very Poor' credit rating (544 with TransUnion) and I am hoping to improve this as quickly as I can so I can apply for a mortgage. I have a question on my credit cards situation though and I'd just like to see what people's thoughts are.

I have recently received a Barclaycard which has allowed me to transfer the balances on my 2 Credit Cards (Fluid and Aqua) to it at 0% for 35 months. Here is how things are now looking:

Credit Card 1: Barclaycard - Credit Limit £13,000 - Balance £10,000 (35 months 0% on balance)
Credit Card 2: Fluid - Credit Limit £6,000 - Balance £0
Credit Card 3: Aqua - Credit Limit £5,000 - Balance £0

My question is which of the following 3 options would be most effective at improving my credit rating? I should point out that I will not be spending on the 0% card at all until the Balance Transfer period has expired.

Option 1). Keep Credit Cards 2 and 3 opened and spend each month on both and pay the balance in full.
Option 2). Close either Credit Card 2 or 3 only and spend each month on the remaining card and pay in full.
3). Close Credit Cards 2 and 3 and acquire a different card with a smaller limit? (I am pre-approved for some Capital One cards so a Hard credit search will not be required).

Many thanks in advance for any help or advice you can offer.

CliveOfIndia

You can ignore the score you see on your credit report, it's not used by any lender - in fact, they can't even see it.

Aside from that, option 1 is probably your best bet.  Use the cards regularly for planned, budgeted purchases, and make sure you always repay in full every month without fail.  This will gradually start to build up a favourable credit history.

Just bear in mind that you need to have plans in place to repay the BT card when the promotional rate expires.  You may be able to transfer any remaining balance to another card - but it's a dangerous gamble to just assume you'll be able to do so.

born_again

Forget about credit rating it means nothing to lenders. Just the CRA love to pedal their 3 figures to scare people into believing they are the be all & end all of your finances.

Do you really need £24K of available credit?

Close the 2 with nil balance, so there is no temptation to start using them again & build up a bigger debt than the £10K you just moved.
Then focus on paying the £10K down before the end of the interest free period.

ManyWays

I suggest closing whichever of 2 the 3 has the higher interest rate. Keep the other open but do not spend on it.
Do not spend on 1 either - but repay as much as possible as fast as possible. Seeing this drop fast is the best signal to a mortgage lender.  Your score is irrelevant. 

CliveOfIndia

ManyWays said:

I suggest closing whichever of 2 the 3 has the higher interest rate. Keep the other open but do not spend on it.
Do not spend on 1 either - but repay as much as possible as fast as possible. Seeing this drop fast is the best signal to a mortgage lender.  Your score is irrelevant. 

If you're clearing the balance in full every month - which you absolutely MUST be doing - then the interest rate is irrelevant.

Without a doubt, reducing (ideally clearing) any existing debt will be a big benefit when it comes to applying for a mortgage.

But using a credit card wisely can also help to establish a solid credit history.  I'm not for one minute suggesting you use it to buy things you neither need nor can afford.  But for things like the weekly grocery shop, which you have to buy anyway, you may as well use a credit card rather than a debit card.  There's no difference in your overall expenditure, but you'll build up a decent credit history by using the credit card.  Just so long as you always repay it in full without fail.

creditcardnewbie

Thank you to everyone who has posted so far. I am very grateful you have taken the time to reply and you have all given me some comforting reassurances on the credit rating side of things.

I do have a budget in place to get the Barclaycard paid down as quickly as possible. Clearing the other 2 cards means I am no longer paying the interest on those so that'll now go towards clearing the Barclaycard balance as soon as possible. 

Isthisforreal99

If you think about it logically, if your credit rating was actually 'very poor' do you think Barclaycard would have given you such a high limit?

The day that Credit Reference Agencies start lending money is the day you can pay attention to their score/rating.