Effect on credit file/ score after paying off debt.
Discussion
I recently had an application declined, I was told one of the reasons could be due to information supplied by credit reference agencies.
So I set myself up on Equifax, where I can see I am credit rated as "fair" at 388 points. I have debts with three different companies, and two mobile phone contracts.
I want to, and will soon be able to pay off in full all(At which point I would close the accounts.) three debts and one of the mobile phone contracts which comes to the value of £4000.
Any ideas what sort of difference I could see in my credit rating, and also how soon I could expect my creditors to update the credit reference agencies to reflect that I have payed them off?
I ask because I wish to progress the aforementioned application ASAP with urgency, it should be noted that the application which I make reference to is not for credit.
TIA!!
So I set myself up on Equifax, where I can see I am credit rated as "fair" at 388 points. I have debts with three different companies, and two mobile phone contracts.
I want to, and will soon be able to pay off in full all(At which point I would close the accounts.) three debts and one of the mobile phone contracts which comes to the value of £4000.
Any ideas what sort of difference I could see in my credit rating, and also how soon I could expect my creditors to update the credit reference agencies to reflect that I have payed them off?
I ask because I wish to progress the aforementioned application ASAP with urgency, it should be noted that the application which I make reference to is not for credit.
TIA!!
Possibly you should talk to a credit counsellor. Credit history is about having credit and paying it on time. Late payments are a key negative for instance, so simply playing off debt may not magically make your score perfect. Its based on behaviour and history as well as absolute amounts of debt.
Thanks for your contribution, RDMcG but I'm afraid none of that is news to me.
Though it would help, improved behavior and history cannot realistically be changed in seven days, when credit history goes back six years!
But paying off everything surely will help!
My previous application may well have been declined as I'm not currently on the electoral role at my current address- something that the credit reference agency kindly reminded me of!
I have now amended this and I'm curious to see what effect this will have on my score as well as paying off and closing four lines of credit. If anyone's interested I'll keep this updated.
Nice cars by the way
Though it would help, improved behavior and history cannot realistically be changed in seven days, when credit history goes back six years!
But paying off everything surely will help!
My previous application may well have been declined as I'm not currently on the electoral role at my current address- something that the credit reference agency kindly reminded me of!
I have now amended this and I'm curious to see what effect this will have on my score as well as paying off and closing four lines of credit. If anyone's interested I'll keep this updated.
Nice cars by the way
RDMcG said:
Possibly you should talk to a credit counsellor. Credit history is about having credit and paying it on time. Late payments are a key negative for instance, so simply playing off debt may not magically make your score perfect. Its based on behaviour and history as well as absolute amounts of debt.
This. I think that paying minimum balance for years gets you a good credit score. That's how, as an unemployed person but fortunately with few outgoings, I was offered a nearly £4,000 credit limit. Would the debts themselves be something you think might cause the application to be rejected, or were there late payments on there? If there are late payments it might be that they are counting the number in the past X months, so it would be impossible to tell when they would drop off if you don't know the periods they take into account.
Certainly the electoral roll is one certainly to do, and that might even have been the sole reason it was rejected.
Don't take too much notice of the credit score - that is generated by them as a guide for the paying subscribers and is most likely not used by whoever rejected you - they would either use their own internal scoring system or possibly would look at specific information on the reports in conjunction with a guide about what is and is not acceptable.
Certainly the electoral roll is one certainly to do, and that might even have been the sole reason it was rejected.
Don't take too much notice of the credit score - that is generated by them as a guide for the paying subscribers and is most likely not used by whoever rejected you - they would either use their own internal scoring system or possibly would look at specific information on the reports in conjunction with a guide about what is and is not acceptable.
Credit Bureau scores are mostly dominated by your current status (oustanding debt amount, arrears) and status/behaviour over the past 12 months (any arrears, number of searches etc). History more than 12 months old may be included in their scorecards (such as extreme events like CCJ's, IVA/Bankruptcy or defaulting), but the scorecards are mostly dominated by your current and recent behaviour / status.
I would expect your score to rise in the month following your debt clearance, and some small incremental rises in future months, subject to no further debt or activity that would indicate an increased risk.
Edited to say: Not being on the electoral roll is a definite no no for credit scoring. There is a distinct difference in risk between those on the roll and those not. Your score will increase once you've registered yourself.
I would expect your score to rise in the month following your debt clearance, and some small incremental rises in future months, subject to no further debt or activity that would indicate an increased risk.
Edited to say: Not being on the electoral roll is a definite no no for credit scoring. There is a distinct difference in risk between those on the roll and those not. Your score will increase once you've registered yourself.
Edited by nammynake on Thursday 10th March 21:18
Couple of pointers for you -
As you've rightly assumed details are not all updated on the same day, but different lenders provide their data on different days. Once you settle an account give it at least 4 weeks to clear from your file - as you may have just missed the submission date for example.
What kind of application was this? This will have a big bearing on the reason for rejection. If not credit, then possible Job or application for a rented property?? These searches do not included the day to day credit transactions you are talking about. Electoral roll is a key part, with CCJ's/bankruptcy & IVA coming into play, along with recent credit searches. So having outstanding debts should not have affected the search you've had done.
Finally on your first point, it depends on if the accounts you have are outstanding balances or actual defaults. If you have defaulted then paying them off makes a slight difference to you score, however it is registered as settled default, so while that is better from a risk point of view, you still defaulted in the 1st place.
If it's an outstanding balance, then in most cases having any kind of up to date balance is good as it shows your managing your money.
As you've rightly assumed details are not all updated on the same day, but different lenders provide their data on different days. Once you settle an account give it at least 4 weeks to clear from your file - as you may have just missed the submission date for example.
What kind of application was this? This will have a big bearing on the reason for rejection. If not credit, then possible Job or application for a rented property?? These searches do not included the day to day credit transactions you are talking about. Electoral roll is a key part, with CCJ's/bankruptcy & IVA coming into play, along with recent credit searches. So having outstanding debts should not have affected the search you've had done.
Finally on your first point, it depends on if the accounts you have are outstanding balances or actual defaults. If you have defaulted then paying them off makes a slight difference to you score, however it is registered as settled default, so while that is better from a risk point of view, you still defaulted in the 1st place.
If it's an outstanding balance, then in most cases having any kind of up to date balance is good as it shows your managing your money.
Always get yourself on the electoral role as soon as you move and remove from the previous address - also ensure that on the electoral role only the people currently living at the house should be on it remove others.
Next DVLA get your driving license changed.
Next every bank/credit card etc all need to be at the same address.
Next always pay the minimum at the very least on any credit card/loan otherwise your credit score goes down.
Note I was once down to a score of mid 400's but had never missed a payment just that the electoral role & bank details were at different locations making that change pushed it up to mid 600's which meant I could get the mortgage. I now am around the 970-990's level and thats purely based upon available credit & outstanding debt (using the 0% balance on ccards into an offset mortgage).
Im gradually closing down the accounts and paying off all the non mortgage debt.
The days of snowballing are not currently very profitable/viable so no need to hold mega £ in debts.
Next DVLA get your driving license changed.
Next every bank/credit card etc all need to be at the same address.
Next always pay the minimum at the very least on any credit card/loan otherwise your credit score goes down.
Note I was once down to a score of mid 400's but had never missed a payment just that the electoral role & bank details were at different locations making that change pushed it up to mid 600's which meant I could get the mortgage. I now am around the 970-990's level and thats purely based upon available credit & outstanding debt (using the 0% balance on ccards into an offset mortgage).
Im gradually closing down the accounts and paying off all the non mortgage debt.
The days of snowballing are not currently very profitable/viable so no need to hold mega £ in debts.
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