How to build credit rating?

How to build credit rating?

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twoblacklines

Original Poster:

1,575 posts

160 months

Saturday 11th February 2017
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OK I have never had a credit card, mortgaged or used finance. The only thing I have is a mobile phone bill, then the usual rent, insurance tax yadda yadda. I pay for all this either straight out of the bank account online or via debit card.

I want to start borrowing lots of personal credit soon (to be used as director loans in company I own). My credit rating is ~700 which is surprising, a friend told me just to get a CC and it will go up if I pay it off every month.

My question is, what card to get and what to actually use it for? Is there a ratio that works best for building credit?

Can I just pay for my phone on it every month? Which is just £10 a month currently.

Thanks

Lynch91

471 posts

138 months

Monday 13th February 2017
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With a credit card I'd suggest the easiest way to use it to improve your credit rating is to put your fuel or weekly shop on it.

Craikeybaby

10,369 posts

224 months

Tuesday 14th February 2017
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Lynch91 said:
With a credit card I'd suggest the easiest way to use it to improve your credit rating is to put your fuel or weekly shop on it.
And obviously - pay it off on time each month!

jeff m2

2,060 posts

150 months

Tuesday 14th February 2017
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I guess US ratings are similar.
If so they take into account total credit available and the percentage utilisation.
Then the number of inquiries against the new lines of credit.

A business credit card is separate from your personal credit rating, I have no idea how they calculate thosebiggrin
Only to say, they seem to be way more generous.

Basically everyone has good credit to begin with, it's what you do that looses it.

But if you do want to bolster credit, take a couple of small loans that you don't need, pay them off on sched.
Completed loans look good.


Jimmy Recard

17,540 posts

178 months

Tuesday 14th February 2017
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That, really. Don't spend more than you normally would - just do the things you have to do on a credit card and pay it from your debit card as soon as it shows on the online page. You should build a credit history pretty easily and it won't cost you anything.

TartanPaint

2,981 posts

138 months

Wednesday 15th February 2017
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Choose your credit card well for the best cashback deal that works for you. E.g. I chose a Tesco credit card because we already shop and fill up at Tesco, so might as well have the extra clubcard points.

Search for "best cashback credit card" and see what catches your eye based on your own shopping habits.

Most headline-grabbing credit card deals are "0% for x months for balance transfers or purchases", which is irrelevant for a card you'll pay off every month, so ignore those. Ignore the best APR too, as you'll never use it. Just look at the rewards.

Don't apply for more than one card every 6 months, as a sudden mass of new credit will dip your score temporarily.


Finally, a tip I'm not sure actually does any good, and I'm sure many will jump in to tell me I'm crazy, but it will certainly do no harm....

Get a second credit card, spend a fiver on it in the first month, then deliberately overpay the bill a bit when the bill comes, say a tenner. Leave the fiver balance in your favour on there and never use it again. Because of the non-zero balance it'll count as an active card (where a card with a zero balance will count as dormant and won't contribute anything to your score). Also, if you don't use a card for x month, some companies will close the account. They won't do that while they've still got your fiver. I kept a nationwide card in this state for many years and noticed it racked up a lot of green monthly ticks on my Experian report, while a dormant (zero balance) card did not.

I know, experian report doesn't count for much in the real world, but it can't do any harm if you're actively trying to build your score.

twoblacklines

Original Poster:

1,575 posts

160 months

Saturday 18th February 2017
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Thanks for the tips!

Especially the active/dormant one!


Venturist

3,472 posts

194 months

Sunday 19th February 2017
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Lynch91 said:
With a credit card I'd suggest the easiest way to use it to improve your credit rating is to put your fuel or weekly shop on it.
100% recommend this.
My credit rating was dirt a few years ago, I think maybe 300-something out of 999. Besides the usual mobile phones and car insurance etc, only had one little credit card and accidentally missed payments on it for several months, I barely ever used it but think I used it in a pinch one time, forgot since it was so unusual to use it, and subsequently moved house without notifying them so didn't get the post.
Started using it for my food and fuel and paying off in full every month (worked out what the bill was likely to be and made sure I kept enough aside). Rating picked up gradually.
Professed up to a few bigger debts over a few years, making the payments on time every time.
Cleared off a few of the smaller ones when I had a windfall after a year or two. At that point my Experian was 997/999.
Just gotten some more finances on some other things so, it's dropped again now, but I was pretty bloody chuffed at the 997 after thinking I was forever fked back in the day.

Frankthered

1,619 posts

179 months

Sunday 19th February 2017
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Top tip for a credit card is to set up a Direct Debit to pay it off every month - either in full or (at least) the minimum payment - this makes sure you don't forget about it like I used to! Makes sure you don't get any black marks on your record.