Question re credit rating

[Derek Smith]

My daughter got married last year and the credit card took a pounding. I couldn't access the money we put by immediately without incurring costs. I've now got it but have been told that if I pay off the whole amount with a lump sum my credit rating will take a hit.

Whilst this seems stupid I was told by my accountant that previously paying the outstanding sum each month had reduced my credit rating.

The sum isn't massive, although unusual for me.

So any truth in the suggestion I will be penalised if I pay it all off at once?

[R8Steve]

Derek Smith said:

My daughter got married last year and the credit card took a pounding. I couldn't access the money we put by immediately without incurring costs. I've now got it but have been told that if I pay off the whole amount with a lump sum my credit rating will take a hit.

Whilst this seems stupid I was told by my accountant that previously paying the outstanding sum each month had reduced my credit rating.

The sum isn't massive, although unusual for me.

So any truth in the suggestion I will be penalised if I pay it all off at once?

No, you won't get penalised for paying it off at once.

For an accountant to suggest paying the outstanding sum each month reduces your credit rating is pretty poor advice.

[Derek Smith]

R8Steve said:

No, you won't get penalised for paying it off at once.

For an accountant to suggest paying the outstanding sum each month reduces your credit rating is pretty poor advice.

I researched the bit about having no outstanding debt. I was told that examples of paying off loans helps reassure the lenders. I was hit by a requirement for a little below £10,000 of unpaid income tax within 3 weeks, this despite me being told that the only reason the demand was being made was because I'd missed an unpublished deadline and that I would get the money returned within 3 months. There are 42 days in a customs and excise three month period.

I had savings but there would be a penalty in taking them out at short notice. So went for a loan expecting the advertised rate as I had no mortgage, no loans and nothing on my credit card. In fact, I didn't have one. My bank hit me with a well above minimum loan rate. The next call came out a little higher and online the rates were about the same.

It seems I was, whilst not untouchable, seen as a risk. I was told the same by my bank loan person, but she was about four so discounted it.

So logic, it seems, goes out the window. We've got no intention for the foreseeable future of taking out a lone of any sorts, but you never know.

[R8Steve]

Derek Smith said:

R8Steve said:

No, you won't get penalised for paying it off at once.

For an accountant to suggest paying the outstanding sum each month reduces your credit rating is pretty poor advice.

I researched the bit about having no outstanding debt. I was told that examples of paying off loans helps reassure the lenders. I was hit by a requirement for a little below £10,000 of unpaid income tax within 3 weeks, this despite me being told that the only reason the demand was being made was because I'd missed an unpublished deadline and that I would get the money returned within 3 months. There are 42 days in a customs and excise three month period.

I had savings but there would be a penalty in taking them out at short notice. So went for a loan expecting the advertised rate as I had no mortgage, no loans and nothing on my credit card. In fact, I didn't have one. My bank hit me with a well above minimum loan rate. The next call came out a little higher and online the rates were about the same.

It seems I was, whilst not untouchable, seen as a risk. I was told the same by my bank loan person, but she was about four so discounted it.

So logic, it seems, goes out the window. We've got no intention for the foreseeable future of taking out a lone of any sorts, but you never know.

If you have no outstanding mortgage, loans or credit cards then while it will not affect your credit score negatively, however, your credit history may be looked at negatively by lenders simply because there is nothing there to assess the risk, good or bad.

Most lenders will look at more than just your credit score when assessing an application. The best approach to use to built your history without incurring interest is to use a credit card monthly for say petrol as an example and pay off in full every month.