How to use credit card to boost credit score

fergusb · 17 April 2019 at 10:02AM

I've just got a credit card for the first time, aiming to improve my credit score. I recently got rejected for a current account due to my credit rating - I believe the problem was high credit usage (I have a £2000 interest free student overdraft maxed out as the money is in savings accruing interest) and low average time with financial institutions (I do all the switching offers).

I'm good with money and am confident that if I use the credit card I will be able to pay it off in full every month and so not pay any interest. What I want to know is which will benefit my credit score more - using the card in this way, or just leaving it sitting there with the £450 credit line untouched

[Deleted User] · 17 April 2019 at 10:04AM

Don't use it to boost the pretend score. Use it to improve your real credit history.

Use your card regularly and clear in full each month. Show lenders that you can handle credit.

The score may drop as a result but that's fine.

Paul_DNAP · 17 April 2019 at 10:08AM

* Use it regularly for everyday spending (groceries, petrol etc.)
* Don't let it bump up to the limit.
* Pay off every bill - IN FULL and ON TIME
* Don't make minimum payments unless absolutely necessary.
* If you are strapped that month, even a couple of quid over minimum won't show as a minimum payment only mark.
* Absolutely never ever never miss payment.

Leaving it sitting there untouched makes it look like you can't trust yourself to run a credit facility.

MallyGirl · 17 April 2019 at 10:34AM

Don't make JUST the minimum payments unless absolutely necessary. Paying just over the minimum, even by a pound, looks better although not relevant as you will be paying in full or you will incur interest

Absolutely never ever never miss payment - set up a DD to pay in full at the right time so you can't mess up

Don't pay off transactions before they appear on the statement - it will look like there has been no activity.

jimbo26 · 17 April 2019 at 10:40AM

Make sure you set up a DD to either. This is really important. You will see post on here with people complaining of missed payment markers because they have tried to be clever and got caught out by bank holidays, or manual payments going in later than they anticipated.

1. Pay balance in full

2. Pay minimum (and over pay manually)

System · 17 April 2019 at 12:32PM

Paul_DNAP wrote: »

Leaving it sitting there untouched makes it look like you can't trust yourself to run a credit facility.

That's not true. Obviously you trust yourself not to use the card in the first place.
The reason lenders don't particularly like it when people don't use cards is that it costs them money to send you a card and open your account. If you don't use it then it costs the lender money.

SlovakianGuy · 17 April 2019 at 12:37PM

jimbo26 wrote: »

Make sure you set up a DD to either. This is really important. You will see post on here with people complaining of missed payment markers because they have tried to be clever and got caught out by bank holidays, or manual payments going in later than they anticipated.

I agree. Just be careful with the first Direct Debit payment as it may take up to 4 weeks until it's fully set up. That's how I almost got a late payment on my Nationwide credit card. I set up a direct debit and the next month I didn't pay off my balance manually as usually, I was just waiting for DD payment to be taken from my current account. It was the due date and nothing happened so I ringed Nationwide and they said the first DD will not be taken yet, as I set up the DD after the statement date last month. If I didn't ring them, I would have a late payment on my file. But since then, I don't have to care about anything. DD is a good thing to have.

SlovakianGuy · 17 April 2019 at 1:03PM

fergusb wrote: »

What I want to know is which will benefit my credit score more - using the card in this way, or just leaving it sitting there with the £450 credit line untouched

Is this a so-called "credit builder" card, such as Vanquis, Capital One, Aqua, or similar sub-prime cards?

Definitely use it every single month and pay off in full by direct debit. Just don't max it out as this makes you look like you rely on credit too much. Use £100 or so, it's enough to build your credit history. If they offer you a credit limit increase, accept it. This is generally a positive thing as it shows that your credit provider trusts you enough to offer you more credit. It doesn't mean you should start spending more on it though.

Actually, if you don't increase your monthly spending after the credit limit increase, this may indicate a good financial discipline.

Later you can apply for a "normal" credit card, for instance, reward or cashback credit card, so you can even get back some % just for using it.

Not sure if it's true, but some people say it's not good to have only a sub-prime credit card and nothing else for several years. True or not, it's still a good idea to get a second credit card offering some perks, as soon as you are eligible for it.

[Deleted User] · 17 April 2019 at 1:56PM

Lenders don't see if a card is sub-prime or mainstream so it makes no difference.

You can also use all of your available credit each month if you pay it back in full - this will show on your report that you have done so, so again makes no difference.

SlovakianGuy · 17 April 2019 at 2:29PM

If nothing else, they can see the name of the card provider like Vanquis and the small credit limit on that card. I'm not saying it's necessarily a bad thing, but some people say it's not good. I think I've seen it in some thread here on MSE forum.

Btw, Noddle flagged up a "negative factor" on my credit file stating "one of your accounts close to its limit" which was actually a credit card with just 30% of credit in use. What the heck...

[Deleted User] · 17 April 2019 at 2:33PM

They can't see the name of the provider.

How to use credit card to boost credit score

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