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First Credit Report, worse than expected, need help understanding

Last post Mon, Dec 17 2012, 5:50 PM by huckster. 3 replies.
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  •  Mon, Dec 17 2012, 5:50 PM

    Re: First Credit Report, worse than expected, need help understanding

    Not sure where the advice to use 30% of your credit limit comes from. I am looking at this from a risk point of view, which any bank or mortgage provider will do. Ok you are paying the credit card bill in full every month and you are using the card to gain some points. But those looking at risk might think that you can't manage the money in your bank properly and like to put all spending on a credit card. They could also think that you are likely to increase your spending on the card, as you don't mind the risk of having a card debt for a short period.

    I personally would not spend £1k a month using a credit card. In your position, you might spend say £300/£400 on the card in a month, which you repaid in full. On occasions for a large purchase you might decide to spend a bit more, as spending on a credit card gives you protection, where the purchase is £100 or more. Again for credit rating purposes you would pay it off when the statement is due or if not possible as quickly as possible. I look at using a credit card as taking out a loan, for which they give you a period that is interest free if paid in full. I am not sure I would want to take out a loan every month. With the current financial situation and employment not being secure, I don't think I would take the risk.

    Your credit record/rating issue is probably just down to recent changes and it therefore takes time for it to recover, with a higher rating to recognise stability.

    • Post Points: 5
  •  Mon, Dec 17 2012, 4:06 PM

    Re: First Credit Report, worse than expected, need help understanding

    Thanks for the reply.

    The reason Im spending 1k a month, is that I read that it is the best to use 30% of your limit, and repay it in full. As my limit is 3.5k, 1k sounds ok.

    Also, I am collecting Avios points, so whenever I can pay for myself, utility top ups for a house or anything else, i want to use my CC to get the maximum return.

    I never spend anything that I cant repay, I treat CC as "a bit better" debit card:)


    P.S. if you think 1k is too much, I can always repay some CC before the statement, so it shows anything less than 1k, but is that the best? What % of the credit card limit would you recommend keeping on the monthly statements?
    • Post Points: 20
  •  Mon, Dec 17 2012, 3:54 PM

    Re: First Credit Report, worse than expected, need help understanding

    Nothing to worry about. Will impove with time. These credit records/ratings are harmed by changes which affect how stable they see you. Obviously you have just moved and set up various things. It is going to take a year or so of regularly repaying any credit, paying bills on time and keeping any bank accounts in good order for your record to improve.

    The thing with these credit reference agencies is not to take them too seriously. They are trying to sell you a service, for which there is a subscription. This is not necessary. Noodle.co.uk offers free access for life to your credit report.

    You will find that your credit record will vary with the different CRAs. Equifax is probably the one used by most credit providers, closely followed by Experian.

    It is good that you are repaying your credit card in full every month, but it could be queried as to why you are spending £1k per month on credit. Personally I see this as a bit risky. Nobody knows what is around the corner and you don't want to place yourself in the position of not being able to pay off the balance. I would suggest that you spend a little less on the credit card, so you have a smaller balance to pay off each month.

    • Post Points: 20
  •  Mon, Dec 17 2012, 2:41 PM

    First Credit Report, worse than expected, need help understanding

    Hello,

    I have just seen my first credit report, and I was expecting it to be a bit better, but having read through it, I think that all the negatives arent that bad, and will be fixed in time, but I need your help to clarify them for me.

    Quick Background - I have got my first Credit Card half a year ago (3500 limit, using ~1000 a month, paying full), opened new bank account a month ago, changed house, got new internet, phone contact, all utility bills on my name and new, quite a few credit checks for all of that.

    Score 551...
    The Bad:

    You have recently opened 1 or more new credit accounts. - I have opened a new bank account a month ago, and I got my first Credit Card about a half a year ago - so this will go away when these are older a bit?

    The age of your accounts indicates lenders are likely to view you as higher risk - So im guessing this is because of the new account/credit card as well? Or internet/phone contracts too?

    You have revolving credit that has been open for less than 10 months. - New credit card?

    You have no successfully settled non-mail order accounts. - What is this and how to remove it?


    The Good:

    The usage of your available credit indicates a lower risk

    And I also has just been put on electoral roll - After that my score improved from 480 to 550

    So am I good to think that all of these bad things will go away in some time?If yes, how long should I have to wait until applying for a new CC? Also, why 3 out of 4 negatives, are related to new CC, as it looks like it. Wouldnt one be enough?

    What is the most annnoying, is that my housemate, who doesnt even have a CC, no bills on her name etc, has 900 credit score, doesnt seem fair

    Please help me understand this credit report, Thanks

    • Post Points: 20