Next steps to improve rating

stuckinazoo · 11 March 2017 at 3:53PM

Hoping to get my first mortgage in the next year or so but worried I'm not doing enough to have a solid credit rating ready.

- I have only one credit card with a limit of £700. I pay it off every month and often owing no more than £100. Some months no balance at all.
- Have no finance arrangements other than mobile contract.
- No loans.

3 questions:

Advice on another forum suggested I should have 2 credit cards. Would it help to apply for a 2nd one now and maybe use it alternately with my first so both have small balances paid off every month?

Also had advice I've not heard before: that is instead of paying balance off completely, a £ or 2 should be left there every month so there is always a live balance which is looked at more favourably. Any truth behind that?

Also, should I apply for my limit on my first card to be raised to beyond £1000? With my small spend, would that provide more evidence I'm low risk?

Thanks for looking.

glentoran99 · 11 March 2017 at 3:56PM

Use card and pay in full when you get your statement, its that simple

Sncjw · 11 March 2017 at 4:02PM

Was theleaving a couple quid advised by rothstein on the board?

stuckinazoo · 11 March 2017 at 4:56PM

No this was a different website.

nic_c · 11 March 2017 at 5:47PM

stuckinazoo wrote: »

3 questions:

Advice on another forum suggested I should have 2 credit cards. Would it help to apply for a 2nd one now and maybe use it alternately with my first so both have small balances paid off every month?

Not sure how much an affect really if it's just your credit score that concerns you

Also had advice I've not heard before: that is instead of paying balance off completely, a £ or 2 should be left there every month so there is always a live balance which is looked at more favourably. Any truth behind that?

It's a misunderstanding, from people spending and then clearing will show a zero balance in the CC Co report to CRA after you clear it. Never purposely leave a balance on as you will be charged interest, instead clear it once the statement comes. You don't pay interest and a balance will be reported.

Also, should I apply for my limit on my first card to be raised to beyond £1000? With my small spend, would that provide more evidence I'm low risk?

Thanks for looking.

You can apply for a limit increase if you haven't in the last year, it is usually based on your income not how you are using it. I had a long standing hardly used card limit increased from £3K to £5K recently. By hardly used I mean zero balance for 11 months of the year and then used for a few quid. I've had the card for over a decade and the total spend on it probably less than £100 over the previous 5 years.

stuckinazoo · 11 March 2017 at 6:20PM

I've just checked my credit score. The only negative it gives me is that my largest credit card limit is low. So raising it seems a good step now. But still unsure if I should apply for a 2nd card. If I did, I could make small payments on both and pay off two balances (under £100 each) each month. If anyone has feedback on how much this could affect my score for the better, I'd appreciate it.

[Deleted User] · 11 March 2017 at 6:32PM

It'll make little difference to your credit file, although it's useful to have a back up.

Remember not to focus on your score, clear in full each month and everything else will take care of itself.

nic_c · 11 March 2017 at 7:05PM

stuckinazoo wrote: »

I've just checked my credit score. The only negative it gives me is that my largest credit card limit is low. So raising it seems a good step now. But still unsure if I should apply for a 2nd card. If I did, I could make small payments on both and pay off two balances (under £100 each) each month. If anyone has feedback on how much this could affect my score for the better, I'd appreciate it.

A second card will probably have a low limit too, so instead of one card with a low limit, you have two. The credit limit increase is probably better as it shows the creditor trust you enough, which is possibly better.

The question is why you are wanting to do it? The answer "to improve credit score" is a pointless task as no one else sees it. If it's because you want some future credit like a mortgage, then its more about how you utilise credit than an unseen score. Will someone lend money to you because you have two credit cards but won't if you only have one? I doubt it. Will a creditor refuse you because you have a low limit? No, not in itself, it's most likely other factors like low disposable income that gave a low limit on one card that will be the factor, not the fact you have a low limit.

DCFC79 · 11 March 2017 at 7:09PM

stuckinazoo wrote: »

I've just checked my credit [STRIKE]score[/STRIKE] history. The only negative it gives me is that my largest credit card limit is low. So raising it seems a good step now. But still unsure if I should apply for a 2nd card. If I did, I could make small payments on both and pay off two balances (under £100 each) each month. If anyone has feedback on how much this could affect my score for the better, I'd appreciate it.

Who knows, its the history that matters most as lenders see it.

Chappaz · 11 March 2017 at 7:43PM

stuckinazoo wrote: »

Also had advice I've not heard before: that is instead of paying balance off completely, a £ or 2 should be left there every month so there is always a live balance which is looked at more favourably. Any truth behind that?

This is only important if you're building credit with a view to getting better credit cards and using them long-term.

The reason is that card companies prefer profitable customers, which are usually those who keep balances they can charge interest on.

If they look at your report and see that you only spend a little on the cards you have, and you clear the balances in full every month (which results in no interest), then they may be more inclined to reject you.

Credit searches aren't just about assessing risk. They'll also assess other reasons why they want you or don't want you as a customer.

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