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    • KellyJay
    • By KellyJay 14th Jan 20, 8:44 PM
    • 3Posts
    • 0Thanks
    KellyJay
    Help. Which accounts should I pay first?
    • #1
    • 14th Jan 20, 8:44 PM
    Help. Which accounts should I pay first? 14th Jan 20 at 8:44 PM
    Hi, i was wondering if anyone could help me increase my credit score. Me and my partner are looking at buying a house this year, but due to being young, silly and naive a good few years ago... my credit rating isn't that great. Its poor actually. There are 5 old account and 2 relatively new ones. The old accounts have really small balances, literally one is about 47 and the biggest is 150 all together about 400 (some have defaults but over the passed 3 years, I have kept up with minimum payments) I am aware of the defaults lasting 6 years, they have 2 years left. The newer ones are Very and Argos. They have bigger balances, from 600 to 1000... my question is, I'm getting some money soon, which I'm going to use towards my debts, however I'm wondering am I best clearing the smaller ones off with it (the money I'm getting wont be enough to clear everything) or shall I use it to pay off a chunk of the bigger balances? Which method do you think would help my score more? Sorry for the essay but any help would be great. Thanks Kelly x
Page 1
    • sourcrates
    • By sourcrates 14th Jan 20, 8:55 PM
    • 19,111 Posts
    • 18,041 Thanks
    sourcrates
    • #2
    • 14th Jan 20, 8:55 PM
    • #2
    • 14th Jan 20, 8:55 PM
    Your credit score is a made up number that no one else sees but you.
    Credit reference agencies use this number as a means of selling you credit improvement products.
    So what the CRA’s think is irrelevant really.

    You just need to make sure you don’t miss payments, settle your defaults, be on the electoral role, in time your credit file will improve.

    Ignore the scores.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File and Ratings, Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to:
    forumteam@moneysavingexpert.com.
    Any views expressed are mine and not the official line of MoneySavingExpert.com.
    For free debt advice, contact either : Stepchange, National Debtline, CitizensAdviceBureaux.
    • middleclassbutpoor
    • By middleclassbutpoor 14th Jan 20, 9:08 PM
    • 639 Posts
    • 588 Thanks
    middleclassbutpoor
    • #3
    • 14th Jan 20, 9:08 PM
    • #3
    • 14th Jan 20, 9:08 PM
    Hi, i was wondering if anyone could help me increase my credit score. Me and my partner are looking at buying a house this year, but due to being young, silly and naive a good few years ago... my credit rating isn't that great. Its poor actually. There are 5 old account and 2 relatively new ones. The old accounts have really small balances, literally one is about 47 and the biggest is 150 all together about 400 (some have defaults but over the passed 3 years, I have kept up with minimum payments) I am aware of the defaults lasting 6 years, they have 2 years left. The newer ones are Very and Argos. They have bigger balances, from 600 to 1000... my question is, I'm getting some money soon, which I'm going to use towards my debts, however I'm wondering am I best clearing the smaller ones off with it (the money I'm getting wont be enough to clear everything) or shall I use it to pay off a chunk of the bigger balances? Which method do you think would help my score more? Sorry for the essay but any help would be great. Thanks Kelly x
    Originally posted by KellyJay
    There are 2 approaches to repaying debt - balanced based or interest based.

    Balanced based sees you paying off the smallest balances first and is considered the best approach where you need motivation to repay your debts. As you pay off a debt, you feel motivated to pay off the next one.

    Interest based sees you paying off the ones with the highest interest. The view is that you will pay off the debts ensuring you pay the least interest.

    My view is that if you can pay off everything within a short period of time, go for the balanced based approach as the interest you will pay extra will be minimal if over a short period.

    I would recommend you watch Dave Ramseys Baby Steps. It is American and some of the steps he teaches need to be adapted beyond step 3 for the UK but if you can get to step 3, it's at this point you should start worrying about mortgages and credit scores (which has already been mentioned is a made up number).
    • KellyJay
    • By KellyJay 15th Jan 20, 1:00 AM
    • 3 Posts
    • 0 Thanks
    KellyJay
    • #4
    • 15th Jan 20, 1:00 AM
    • #4
    • 15th Jan 20, 1:00 AM
    Thank you both for your comments ♡
    Can I just ask, when we eventually apply for a mortgage, what will they look for if they can't see the credit score number? My credit score is better than it was, so if they only look at my history, then it will go against me wont it? Even though it's better now?
    • DCFC79
    • By DCFC79 15th Jan 20, 8:28 AM
    • 35,622 Posts
    • 22,488 Thanks
    DCFC79
    • #5
    • 15th Jan 20, 8:28 AM
    • #5
    • 15th Jan 20, 8:28 AM
    Thank you both for your comments ♡
    Can I just ask, when we eventually apply for a mortgage, what will they look for if they can't see the credit score number? My credit score is better than it was, so if they only look at my history, then it will go against me wont it? Even though it's better now?
    Originally posted by KellyJay

    I told you last night and its been mentioned here that your score isn't seen by anyone but your history is what they will see.


    They want to know how you run the financial side of things eg unpaid debts.
    • sourcrates
    • By sourcrates 15th Jan 20, 10:00 AM
    • 19,111 Posts
    • 18,041 Thanks
    sourcrates
    • #6
    • 15th Jan 20, 10:00 AM
    • #6
    • 15th Jan 20, 10:00 AM
    Every creditor has there own credit scoring system, they run that against the information contained in your credit file, and take into account what’s in your application form.
    Depending on the criteria they deem acceptable as a borrower, it will either come back yes or no.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File and Ratings, Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to:
    forumteam@moneysavingexpert.com.
    Any views expressed are mine and not the official line of MoneySavingExpert.com.
    For free debt advice, contact either : Stepchange, National Debtline, CitizensAdviceBureaux.
    • jbkmum
    • By jbkmum 15th Jan 20, 10:01 AM
    • 235 Posts
    • 397 Thanks
    jbkmum
    • #7
    • 15th Jan 20, 10:01 AM
    • #7
    • 15th Jan 20, 10:01 AM
    They will look at your credit file - they will look at what accounts you have open and what balances you have. They will look at defaulted accounts, the amount, and the age. They will want to know if any are recent, or if any have not been paid off.
    01/01/2020: 41,714.29
    15/01/2020: 41,561.43
    • EssexHebridean
    • By EssexHebridean 15th Jan 20, 12:03 PM
    • 9,896 Posts
    • 50,308 Thanks
    EssexHebridean
    • #8
    • 15th Jan 20, 12:03 PM
    • #8
    • 15th Jan 20, 12:03 PM
    Thank you both for your comments ♡
    Can I just ask, when we eventually apply for a mortgage, what will they look for if they can't see the credit score number? My credit score is better than it was, so if they only look at my history, then it will go against me wont it? Even though it's better now?
    Originally posted by KellyJay
    And this is a good reason why the suggestion that we so often see on adverts etc that the "score" is the be all and end all is so totally false!

    Just keep paying things down, get unused accounts closed when you've cleared them. Avoid using overdrafts and never EVER take a payday loan. As time passes that history of yours will then start looking better and better. personally, in your position, I'd stop buying things from catalogues as well as there can be a temptation there to spend beyond your means on the basis that you can pay it off over time - the problem occurs when the next lot of spending happens before the last lot has been cleared!

    I'd suggest that your first step here is to put together a proper household budget which should include ALL your expenditure - and start saving money monthly for any annual expenses that you know about like insurances etc. Building a small "Emergency fund" pot is also a good idea - for someone renting furnished accommodation, with no car aim for 250 to start with; renting unfurnished and no car 500, and either renting unfurnished with a car OR as a homeowner with or without a car aim for 1000 as a starting level.

    You say that you are looking to buy this year, so presumably you already have savings in place towards a deposit? Are those in a LISA or HTB ISA? If not - and you are in a position to withdraw savings to clear any debt that you are paying interest on, it may be worth you considering that approach, but the budget is still something that is needed to ensure that you spend within your means going forwards.
    MORTGAGE FREE 30/09/2016
    SOA CALCULATOR (for DFW newbies): SOA Calculator
    • middleclassbutpoor
    • By middleclassbutpoor 15th Jan 20, 10:00 PM
    • 639 Posts
    • 588 Thanks
    middleclassbutpoor
    • #9
    • 15th Jan 20, 10:00 PM
    • #9
    • 15th Jan 20, 10:00 PM
    Thank you both for your comments ♡
    Can I just ask, when we eventually apply for a mortgage, what will they look for if they can't see the credit score number? My credit score is better than it was, so if they only look at my history, then it will go against me wont it? Even though it's better now?
    Originally posted by KellyJay
    They will check your credit file but with a mortgage they will also look at things like;

    - The size of your deposit (the higher this is, the less risk it is to the lender)
    - Your income and how how long you have been in employment
    - Your financial stability - is this employed/self-employed etc .
    - Your ability to live within your means - evidence of being in overdrafts etc
    - Your affordability to afford the repayment at increased rates.
    - The type of property you are looking to purchase
    - Whether this is freehold/leasehold
    - Whether its built out of the correct material

    They will also have models which give them insights into how you affect the risk of the lenders overall lending. Your agreement in principle will often be based on your credit file but it could also be impacted by other factors such as demographics/geography and will have built computer models which show;

    - Whether people typically that fit your demographic are good payers or not
    - Whether people in your area are more likely to default.
    - Whether there is room within the lending tolerances to keep arrears figures within their acceptable levels.
    - Whether the product you are selecting is likely to make you a profitable customer.
    - Whether houses in certain areas are good for capital appreciation etc.

    Plus many many more things. But NONE of them are based on the 3 figures you see on your credit file.

    I hope this gives you a better insight into how your credit score affects your ability to get a mortgage.
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