Credit cards whilst building credit rating
Mixman
Posts: 7 Forumite
After having a poor credit rating when I was young, I didn't take any measures to monitor or improve it until recently. I have been using Clearscore to work on it and have been watching it slowly build.
I eventually started getting pre-approved offers for credit cards within the Clearscore app, so in June I went ahead and applied for a Capital One card - My first one in 20 years, which was an exciting moment for me
My monthly habit is this:
I have heard that more lines of credit, along with an increase in your credit limit will lead to a better score, so I am wondering if it is worth taking up some more of these offers in order to do that.
Here are my thoughts on this:
This does leave me with some questions though, so I thought I would come here for some help with this
I eventually started getting pre-approved offers for credit cards within the Clearscore app, so in June I went ahead and applied for a Capital One card - My first one in 20 years, which was an exciting moment for me
My monthly habit is this:
- I make a small purchase at the start of the month so that it has utilisation.
- 2 days later the Capital One app allows me to pay the balance, which I do with my debit card.
- Another 2 days later my balance shows as 0 again in the app.
I have heard that more lines of credit, along with an increase in your credit limit will lead to a better score, so I am wondering if it is worth taking up some more of these offers in order to do that.
Here are my thoughts on this:
- I only have 5 months average credit history with credit cards, as I only have that one card. I would like to get a mortgage in a couple of years (Jan 2022, with the way that I am saving), so I think that starting now so that my average age can start building again would help, and will give the hard searches time to leave my credit report.
- The interest rates on these cards are likely to be very poor - But as I have no intention of using them as lines of credit, the interest rate itself does not matter. They just need to have no fee.
- I will need to do card juggling once a month to ensure each card gets a little use and is paid off as soon as possible. This is no issue though, as I have finally become good at organising things like this.
This does leave me with some questions though, so I thought I would come here for some help with this
- How many is too many? I would prefer to get any extra as soon as possible so I can take the hit now (when the hard searches are added to my report) and reap the benefits later when they have disappeared, my average card age is higher and my limit is higher. But..
- Would the cut-off for these if I apply in close proximity come sooner than the answer to "How many is too many"? I wouldn't want to start getting rejected because I have started taking more out.
- Is this even worth doing? I really don't mind the effort of managing it each month, but maybe the benefit over the next 2 years is not worth it, if the impact of this tiny.
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Comments
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Ignore any reference to your score and rating and ignore the CRA’s “advice” on building it up.
Lenders do not see or care about the CRA’s rating or score.
Pay the card off in full after each statement, not after each transaction.
As for how many is too many - there’s not really an upper limit and it varies on a persons circumstances (salary, affordability, debt, history etc.)
It’s best to have at least 2, and ideally from different providers (Visa and Mastercard) to cover bases for any IT failures or card acceptance issues etc.0 -
The purpose of a credit card is to obtain maximum benefit from it not to build up some sort of imaginary score seen only by yourself and not seen by lenders.
The way you are conducting your credit card account is silly. Use the card, wait for a statement and repay by direct debit. Actually use the card for your benefit to make use of the 56 days interest free credit keeping the money in your bank account possibly earning interest and maintaining a healthy bank balance.
You do not need to do card jogging to make sure each card gets a little use and paid off as soon as possible. Give each card some BIG use and repay after you get the statement preferably by direct debit. Why would a lender increase the credit limit on a card which is barely used?
There is no 'hit' involved. Apply for another card now. Then wait a few months before applying for another. This is nothing to do with taking a hit or your imaginary credit score. It is to do with avoiding rejection by applying for too much credit at the same time thereby making yourself look desperate for credit.
As or how many is too many. I would say have at least 3 or 4.0 -
Use your CapitalOne card for all your budgeted transactions. Stuff such as groceries and monthly travel costs for example. Then once the statement arrives, you should have no problem paying the balance in full, before the due date, because you have only used the card for budgeted expenses.
The simplest way to pay the statemented balance, is to set up a DD to pay the full balance each month.I work within the voluntary sector, supporting vulnerable people to rebuild their lives.
I love my job
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Thanks for the responses
The reason why I do it like that is because early on, I did my shopping & fuel using that card and somewhere between that and paying it off, the credit utilisation was sent off, which triggered a drastic (but temporary) drop in score. Because the credit limit is only £400, it doesn't take much spending to use a large chunk of the credit available.The way you are conducting your credit card account is silly. Use the card, wait for a statement and repay by direct debit.
I do have my DD set up to pay the balance in full.. I've just been too scared to keep the balance that long 😂0 -
Understood.Thanks for the responses
The reason why I do it like that is because early on, I did my shopping & fuel using that card and somewhere between that and paying it off, the credit utilisation was sent off, which triggered a drastic (but temporary) drop in score. Because the credit limit is only £400, it doesn't take much spending to use a large chunk of the credit available.
I do have my DD set up to pay the balance in full.. I've just been too scared to keep the balance that long ��
The drop in credit score is meaningless … meaningless. Nobody except you will ever see it.
Scared of what?
With a £400 credit limit paid by direct debit and allowing for the fact that the direct debit will not be taken until well into the second month, would suggest a spend of about £150 per-month.
With such a low limit you really have no choice but to have a high utilisation % in order to make any proper use of the card. Lenders will know this and they will also see that it is being repaid in full each month. They will see how you are conducting your account. The only thing they will NOT see is the credit score.0 -
Yep, i realise it's my own insanity lol.
Thank's for the advice everyone. I'll adjust my spending accordingly.
I opted to go for both a Visa and a Mastercard to give me a total of 3, and i'll try and utilise ~£150 on each, assuming both come with a limit of £400 (I saw that one of them does)0 -
Apply for ONE now not two. Leave the second one for now.Yep, i realise it's my own insanity lol.
Thank's for the advice everyone. I'll adjust my spending accordingly.
I opted to go for both a Visa and a Mastercard to give me a total of 3, and i'll try and utilise ~£150 on each, assuming both come with a limit of £400 (I saw that one of them does)
How do you know or how have you predicted that you will get a £400 limit?0 -
Transferring the money immediately probably means that it's always reporting "£0 in use" to your credit files because they the chances are that whichever day of the month that it reports, you'll have already transferred the money. What if it's reporting on day 15 of the billing cycle, for example? This is why people have told you only to pay it down to zero after you receive the statement. And when you receive the statement, only pay the statement total, not the entire amount on the card (very recent transactions won't be included in the statement yet).
If you find it too stressful to use hundreds of pounds on there, just use it for "all fuel", for example.0 -
I applied for itHow do you know or how have you predicted that you will get a £400 limit?What if it's reporting on day 15 of the billing cycle, for example? This is why people have told you only to pay it down to zero after you receive the statement.
I think that's probably spot-on. I just checked ClearScore and the next report is in 3 days. The month where it did show my usage, it would have done so for the middle of the month.
I'll start letting the direct debit take care of it on the 1stIf you find it too stressful to use hundreds of pounds on there, just use it for "all fuel", for example.
I have a monthly car park burn of £140 that fits the bill nicely 😐0 -
Utilisation doesn’t matter if you’re paying in full.
The CRA’s will show the statement balance of the card when reported and also a payment amount.
This will even out the statement balance so your report will “level out” month on month.0
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