Using credit card Properly for credit rating

Jrmellet · 12 December 2019 at 4:31AM

Hi there I am probably overthinking this but just wanted to double check some things. So I have been having a nightmare with my credit rating for the past 2 years because of Three mobile entering the wrong address and then not closing my account leaving a default on a credit file with the wrong address so up untill about a week ago I was unable to even find my credit profile. However I have just got the default removed and address updated with all my creditors and have finally been accepted for a credit card! Which leads to my question.

So it only has a £200 limit and I am only using it to build my credit rating. I have read different things on different sites but in essence if my understanding is correct In order to get a good credit rating from this I need to stay within 10/30% of the credit utilisation they are talking about so does this mean for me to build my credit rating I should only leave a balance of £20 on there and pay that off at the end of the month? If this is the case could I for example spend £70 on it and then immediately put £50 in to bring the balance down to £20 then paying that £20 off before the end of the month. I really don’t want to do anything to mess my rating up as it’s taken m me so bloody long and 2 years of good credit has gone to waste thanks to three bloody mobile!!

Also this credit utilisation i here is about using the total amount of credit you have available so if I have a mobile phone contract does this get added to my total debt? So if I have £400 to pay off or the actual figure of £16 a month still on the phone and A £200 monthly credit limit. Does that mean my monthly credit is actually £216 so in essence I can spend 10% of that for a good utilisation rate. Any help would be great! Thank you for taking the time to read and I apologise for the lengthy post!

John:beer::j

Ben8282 · 12 December 2019 at 5:01AM

While the general advice is not to use too great a % of available credit, this really only applies to individuals who don't repay their credit cards in full and carry a balance from month to month and individuals with much higher credit limits. In your case it would be ridiculous to expect somebody with a £200 credit limit to use only 10% of it.

I should only leave a balance of £20 on there and pay that off at the end of the month? If this is the case could I for example spend £70 on it and then immediately put £50 in to bring the balance down to £20 then paying that £20 off before the end of the month.

No. Use the credit card for your purchases. Don't go up to 100% as your run the risk of accidentally exceeding your credit limit. Wait for a statement; don't make any repayments until you receive one. Repay the full balance preferably by direct debit, although with such a small credit limit paying by direct debit can restrict your ability to use the card in the second month as you will have to wait until the direct debit has been taken before the balance has reduced sufficiently for you to be able to use the card again.
If you go for the recommended full balance direct debit option would suggest a spend of about £75 per statement period, allowing the balance to increase to around .£150 in the second and subsequent months prior to the direct debit being taken. Repeat each statement period.
Alternatively, if you don't go for the full balance direct debit option, you could spend more in each statement period, say up to 80% of the credit limit, then repay immediately you receive the statement (but not before) and spend the same amount again the following statement period.
Personally I prefer to pay by full balance direct debit but with such a low credit limit waiting for the direct debit to be taken can restrict your ability to use the card.
Don't use your card only to build a credit rating. Use your card for your benefit. The credit rating will take care of itself so long as you maintain your accounts in correctly i.e. no late or missed payments. no exceeding the credit limit and absolutely no more defaults!

Also this credit utilisation i here is about using the total amount of credit you have available so if I have a mobile phone contract does this get added to my total debt? So if I have £400 to pay off or the actual figure of £16 a month still on the phone and A £200 monthly credit limit. Does that mean my monthly credit is actually £216 so in essence I can spend 10% of that for a good utilisation rate.

No. This is confused and not correct.
I don't believe the outstanding amount on your mobile phone contract is included in the utilisation % figures on your credit report. Check this and advise if I am wrong.
Concerning the £200 monthly credit limit, am assuming that you are referring to the credit card credit limit and not a monthly over-allowance use limit on your mobile phone? And it is not a monthly credit limit. The credit limit is the maximum amount that can be outstanding on your card at any time, not a monthly figure.

Jrmellet · 12 December 2019 at 8:57AM

Oh ok thank you very very much this has been very helpful and I share your thoughts on only using 10% of a £200 limit! But thank you I will defiantly take this all on board!

maxximus75 · 12 December 2019 at 7:19PM

For starting out with a credit card just use it as you need and remember to pay it off, in full each month.

I am sure in a short time, you will receive a credit limit increase.

Generally, the credit card company doesn't really have a history of how you have dealt with credit so obviously, they are cautious about the limit they will give.

As you spend/repay, you start to build up a history which then gives them more information to predict your future habbits and thus, to grant an increase to your credit limit.

Remember to at least have a direct debit set up for the minimum payment each month (full payment is far better).

CJRyder · 13 December 2019 at 11:50AM

Personally I would just buy a pint of milk (or similar low value item) once a month and leave it at that. Set up a Direct Debit for full repayment each month if you haven't already. Rather than think "Did I spend £20 or £30?", keep it to a small single purchase except for emergencies. Use debit card for everything else.

Ben8282 · 13 December 2019 at 5:38PM

CJRyder wrote: »

Personally I would just buy a pint of milk (or similar low value item) once a month and leave it at that. Set up a Direct Debit for full repayment each month if you haven't already. Rather than think "Did I spend £20 or £30?", keep it to a small single purchase except for emergencies. Use debit card for everything else.

Completely disagree with this advice.
Why would any lender increase the credit limit with such a pattern of use and why would somebody use a debit card if they can use a credit card? I almost never use a debit card for purchases,

yksi · 13 December 2019 at 6:26PM

You're making it too hard. Spend £70-ish per month, wait for your statement, pay in full. Just choose something which costs this much every month (I put all my fuel on the credit card).

Some providers will close an account which barely gets used and a pattern of spending two quid really doesn't make you look like you can handle credit safely...

Rocksolid · 13 December 2019 at 11:59PM

I was of the same doubt.

Based on my discussion in this forum, you can use that amount but do not touch the limit!
In the end everybody spends at least 200 to live per month, different is if you have had a 3k cc.

It's a good start, and probably the only one, be sure to repay in full every month the balance and wait 2-3 months as I've done, then apply for another credit card.
FORGET high street banks, especially in your situation, take the cc from credit institutes, the ones here advertised are good.
They don't even run an hard credit check, only a soft credit check, that is fantastic.

With these 2 cc you should have at least 400, that in 5-7 months potentially can become 600-800.

Remember that those are not your money, so do not spend what you don't have!

In my case probl!m solved, I wanted to speed up the credit history building because I'm a new comer in UK, so not a bad situation as yours but still I have many limitations here.

Regarding addresses, man you need to have a file with whoever has your address and register bills upon it, and every time you relocate you need to update each of them.
Even if you don't pay the gym they contact a credit agency, also your dentist, be carful.

I hope all this helps.

It would be good to add in the MSE guide that for a new comer is useless to apply in high street banks, as well as your situation, maybe some moderator can consider it.

Rocksolid · 29 December 2019 at 6:51PM

Just noticed with these easy cc... Be careful to set up your direct debit, in the first month it doesn't work (sometimes mentioned, sometimes not), and during the time of repayment, usually those 5 last days, don't use the card or you may end up paying interest if in back-end the data are not up to date, it may ask your bank to pay less than it should.

They should have a way to avoid this, I would consider it a basic rule that when they ask for that amount during the direct deposit transaction, then the process for that month is ended, but seen that in our situation we can't mess up, don't even take the risk to test it.

[Deleted User] · 29 December 2019 at 7:01PM

Always make a manual payment on the first statement because more than likely the DD won’t be setup in time.

I’ve NEVER paid interest on any credit cards even when the DD is not setup in time.

Using credit card Properly for credit rating

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