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  • FIRST POST
    • gionnetto
    • By gionnetto 6th Jul 18, 9:26 AM
    • 16Posts
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    gionnetto
    How to use a credit card?
    • #1
    • 6th Jul 18, 9:26 AM
    How to use a credit card? 6th Jul 18 at 9:26 AM
    Hello,

    I've gotten my first credit card. I've read a lot about it, so I already know the following:
    1) pay the full balance every month
    2) use DD - which I have already set up
    3) never use it above 30% of your limit

    This being said, I was trying to maximize my chances for a credit limit increase (I only need it because Experian takes any limit below 500 as a negative, and my limit is 500 because I've moved here just 13 mo ago), and read a lot about behaviour scores. So my questions are:
    assuming that I won't spend more than 150 GBP/mo on it, how do the following expenditure patterns impact my chances for an increase:
    1) using it for food and bills vs using it for more "frivolous" purchases (such as makeup, movie/theatre tickets, museums, books)
    2) 2-3 bigger purchases vs many small ones
    3) timing with respect to when the statement is due (13th of every month) vs the payment is due (25 days later)

    Thank you
Page 1
    • stevenhp1987
    • By stevenhp1987 6th Jul 18, 9:36 AM
    • 669 Posts
    • 532 Thanks
    stevenhp1987
    • #2
    • 6th Jul 18, 9:36 AM
    • #2
    • 6th Jul 18, 9:36 AM
    I don't think 1-3 make any difference.

    Not sure about 30% usage, if you are only using 150 of a 500 limit, the lender might think you don't need an increase? 30% is a good amount for your overall credit usage showing you can borrow and pay back without going overboard, but I'm not sure it really applies to such a small limit!

    Who is the lender? each lenders have different policies regarding credit limit increases.

    I would just put regular spending on it and pay it off by DD (or, if you are near the limit, ASAP but after the statement date).
    • zx81
    • By zx81 6th Jul 18, 9:36 AM
    • 17,637 Posts
    • 18,780 Thanks
    zx81
    • #3
    • 6th Jul 18, 9:36 AM
    • #3
    • 6th Jul 18, 9:36 AM
    Just spend what you would normally buy and clear in full each month. Don;t worry about keeping below a % on a low limit card where you are clearing in full each month.

    Don't take any notice of Experian suggestions. Your limit will increase in time.
    • jimbo26
    • By jimbo26 6th Jul 18, 9:36 AM
    • 416 Posts
    • 196 Thanks
    jimbo26
    • #4
    • 6th Jul 18, 9:36 AM
    • #4
    • 6th Jul 18, 9:36 AM
    It appears to be a dark art with no set criteria between lenders or even lenders themselves. Some seem to get increases when they are always maxed out, some don't some get increases with little usage, and some don't. The best you can do is use it and pay it off each month, and never, never miss a payment.
    • Nasqueron
    • By Nasqueron 6th Jul 18, 9:37 AM
    • 4,896 Posts
    • 2,968 Thanks
    Nasqueron
    • #5
    • 6th Jul 18, 9:37 AM
    • #5
    • 6th Jul 18, 9:37 AM
    Ignore the fictitious credit score, nobody but you sees it.

    Nobody knows exactly why a card provider will up the limit (else everyone would tailor their behaviour to do this) but if you spend and pay off in full every month (ignore the 30% rubbish, so long as you're not over limit that's fine) then give it a few (6+) months and you might get one or you can ask for one. Sainsburys gave me a card limit increase which I declined (and they did it anyway...) and then gave me another even though I declined the first time around and I spend maybe 400-500 a month on it shopping and fuel and the limit is 3000 or more. I leave it as might be useful for a BT
    • Vortigern
    • By Vortigern 6th Jul 18, 10:55 AM
    • 2,483 Posts
    • 1,673 Thanks
    Vortigern
    • #6
    • 6th Jul 18, 10:55 AM
    • #6
    • 6th Jul 18, 10:55 AM
    Use it for food, fuel and frivolous purchases. Don't use it for cash, foreign currency, or gambling.
    • MallyGirl
    • By MallyGirl 6th Jul 18, 11:25 AM
    • 2,805 Posts
    • 7,815 Thanks
    MallyGirl
    • #7
    • 6th Jul 18, 11:25 AM
    • #7
    • 6th Jul 18, 11:25 AM
    Use it for food, fuel and frivolous purchases. Don't use it for cash, foreign currency, or gambling.
    Originally posted by Vortigern
    or charity contributions - like just giving. Gambling is not always obvious - a raffle would count.

    Generally just stick to buying 'things' and you will build up a good history.
    • gionnetto
    • By gionnetto 6th Jul 18, 12:21 PM
    • 16 Posts
    • 0 Thanks
    gionnetto
    • #8
    • 6th Jul 18, 12:21 PM
    • #8
    • 6th Jul 18, 12:21 PM
    My thinking was as follows...

    Reading around, I got the impression credit card companies, especially subprime ones, use behavioural scores more heavily, and was trying to figure out how the "credit builder" behavioural pattern differs from the "established credit" one. People with not a lot of money (or credit history) might be responsible users, whereas people with plenty might be not very responsibile - and subprime lenders might want to predict which ones will be sustainable, and which ones won't.

    So, all factors being equal (using the card every month up to 30% or even more, paying it off in full with DD) if I were a lender and I'd see a borrower buying food and paying utilities on credit, I'd think s/he has issues managing the cashflow. On the other hand, if I'd see him/her using it for non-necessary purchases, I would think "Ok, this person has a better grasp on budgeting, and can discern what is essential and what is a plus". On top of it, 3-4 (relatively) bigger purchases (car hire, hotel reservation, airfares) would be more profitable on them.

    Hence the questions I've asked in this thread re: trying to figure out what behavioural pattern to mimick to get faster increases (mainly for car hire, travel deposits, etc).
    • enthusiasticsaver
    • By enthusiasticsaver 6th Jul 18, 12:30 PM
    • 6,677 Posts
    • 14,141 Thanks
    enthusiasticsaver
    • #9
    • 6th Jul 18, 12:30 PM
    • #9
    • 6th Jul 18, 12:30 PM
    I don't think credit cards look into spending behaviours to decide whether or not to increase the limit. My advice would be use it for 6 months and then ring and ask them to increase it. You have a low limit because you have just moved, have little to no credit history and you don't say what you earn but usually the limit reflects that too. I think I would go higher than 30% each month or the credit company would think that the limit is fine. If you are clearing it each month the percentage used does not really matter so long as it is within the limit. Don't go up to the full 90% but I would have said going as high as 300 or 350 would be ok.
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    • zx81
    • By zx81 6th Jul 18, 12:31 PM
    • 17,637 Posts
    • 18,780 Thanks
    zx81
    My thinking was as follows...

    So, all factors being equal (using the card every month up to 30% or even more, paying it off in full with DD) if I were a lender and I'd see a borrower buying food and paying utilities on credit, I'd think s/he has issues managing the cashflow. On the other hand, if I'd see him/her using it for non-necessary purchases, I would think "Ok, this person has a better grasp on budgeting, and can discern what is essential and what is a plus". On top of it, 3-4 (relatively) bigger purchases (car hire, hotel reservation, airfares) would be more profitable on them.
    Originally posted by gionnetto
    That's very much a mis reading of the situation.

    Lenders expect to see a range of transactions - and certainly the essentials. The only ones to be wary of are gambling and other indicators of high risk.

    Clearing in full is the key. Risk is based on your profile, rather than your monthly transactions.
    • gionnetto
    • By gionnetto 6th Jul 18, 12:32 PM
    • 16 Posts
    • 0 Thanks
    gionnetto
    Aside from gambling, what are the other indicators?

    Also, if clearing in full is the key, why is it that some get limit increases quickly and some take years while they both clear it in full? And I mean, even with the same lender!
    • zx81
    • By zx81 6th Jul 18, 12:36 PM
    • 17,637 Posts
    • 18,780 Thanks
    zx81
    High cash withdrawal is another key one. Others will vary - eg cryptocurrency.

    Not two customers are the same. If you're in a high risk cohort, you will be treated more cautiously. But clearing in full is a standard way of lowering your risk across all segments.
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