credit cards and ratings

[xir_]

Hey bit of a generic question

I have decided to start using my credit card for my day to day transactions in order to build up a credit rating. Does anyone know if a credit rating will increase if one treats the credit card like a debit card and keeps a positive amount of money on it, or are you required to be in debt and then repay for the credit rating to improve.


cheers

xir

[PuddingKnife]

Maybe Swoll will find this thread, he's quite knowledgeable in this area.

[LowSky]

having a small balance that you repay is actually best... i know it seems dumb to be in debt to a bunch of creditors but thats how the system works. dont give them extra money for a positive balance, those idiots think you dont know how to pay your bill and rate you negitively.

Honestly the best poslicy is to just save money and use other things like your bills to build a credit score. things like phone bills, car loans, car insurance all help your credit score.

[xir_]

having a small balance that you repay is actually best... i know it seems dumb to be in debt to a bunch of creditors but thats how the system works. dont give them extra money for a positive balance, those idiots think you dont know how to pay your bill and rate you negitively.

Honestly the best poslicy is to just save money and use other things like your bills to build a credit score. things like phone bills, car loans, car insurance all help your credit score.

Thanks for the advice, the reason i decided to start using is i just started earning for the first time and i wanted to make use of the card protection you get with a credit card.

Rather annoyingly i just got turned down from barclays for a debit account and they don't know why, i should have a spotless credit rating, so im now trying to get my one free annual credit report.

but i will take your advice on board, cheers

[LowSky]

I can tell you why they said no to you, its because of the financial meltdown. If your on the younger side many banks have been warned or out of there own policy dont want to take on younger people because of the less chance you have to pay back your loans. in the past it meant more money through higher rates, no it means a bigger chance for them to go broke.

Seriously, don't give your money to banks, just because you want a credit rating.. save it in an account (which is used toward your credit score). Try a Credit Union as they offer better rates for savings accounts.

As a rule remember that the more assets you have the easier it is to get credit. the more liabilities you have the less credit you we will be given

Assets include anything with value, like cash , credit owed to you or income, property for example land and homes are great assets if you have no liens on them.

Liabilities are things that loose value or that you still owe money on, like cars and outstanding debt. Too much liabilities and you wont be able to get a credit line as banks will weigh your ability to pay them back.

Oddly having no liabilities is often seen negatively but not as badly as carrying high levels of credit card debt. Creditor like to see a coming and going from your accounts, it makes you look like you are good at keeping a good balance.

[RiceMonster]

As far as I know, as long as you pay your credit card bill immediatly, you should have a good credit rating. I don't think you have to use it all the time.

[Uruz2012]

As far as I know, as long as you pay your credit card bill immediatly, you should have a good credit rating. I don't think you have to use it all the time.

Oddly enough if you carry a balance your score will increase faster than if you pay the card off completely. Companies want you to pay them interest but also want you to pay off your debt so the best thing to do is build a bit of a balance and then pay it off slowly. Make more than the minimum payment but don't pay it off too fast.

[benj1]

credit ratings are based on your history of paying back debts etc, and are used by banks etc to work out, firstly if they are likely to get their money back and second how much money they are likely to make.
this means that yes a credit card will increase your credit rating because there is a history of paying a debt back, as for having a positive balance, no it won't do your rating harm, its just the same as paying it off in full every month. ironically the best thing for your credit rating is to just pay off the minimum balance every month, credit card companies like this because you pay interest which is where they make their money, note that i don't recommend that, if you have a credit card its best to pay it off in full every month, also note that this is in normal times ie no credit crunch so they may take a different view now that money is short.

@lowsky
first savings don't affect your credit score (in the uk anyway). second its all very well saying you dont need a credit rating, but what happens when you want a mortgage for a house and you can't get one because you don't have a credit history.
third you don't find it easier to get credit if you have more assets, my girlfriend had a credit card she couldn't realy use because of the low credit limit and the bank refused to increase the limit, me earning half what she does applied for a second credit card and got one with about 15 times her spending limit, and thats on top of the student loans that i have.

credit cards are fine if you use them properley, if you pay them off avery month, it helps with cash flow, i even make money from mine (2% cash back :P(plus money being in my current account for longer))

ps being on the voting register is quite good for your credit rating also

[frrobert]

I am going to be the stick in the mud. Who needs a credit score?
A credit score is really an "I love debt score"
Some of the most successful people have a zero credit score because they do not go into debt.

My wife and I pay cash for everything and have no credit cards. We save up our money to buy major purchases. Before anyone thinks we are rich or anything, we would be classified middle class at best.

The only debt we have is a home mortgage and you do not need a credit score for a mortgage. The key is to find a lender that does manual underwriting. In other words the lender looks at you as a person, your job history, your income rather then just looking at how much debt you have piled up.

[bodhi.zazen]

Credit card ratings are by and for the credit card industry.

The only winning move is not to play. Learn to live within your means, have you learned nothing from the economic meltdown ? It does not matter if your income in in 2, 3, or 7 digits, if you live outside your means you will regret it.

People do not accumulate wealth with credit, lol.

[shredkingj]

@bodhi.zazen: I think there's a time and a place for credit, just like anything. Even with the drop in housing prices, in most places, you would have to save for a very long time to purchase a modest home with cash. And by the time you save that money, inflation will surely have out-paced your savings! I do agree with you on living below your means is the key to wealth building.

Another thing with credit cards is to be careful how much of a balance you have on it. If the balance is too high in relation to your limit, then they'll start subtracting points. It's all a game, really.

[bodhi.zazen]

@bodhi.zazen: I think there's a time and a place for credit, just like anything. Even with the drop in housing prices, in most places, you would have to save for a very long time to purchase a modest home with cash. And by the time you save that money, inflation will surely have out-paced your savings! I do agree with you on living below your means is the key to wealth building.

Another thing with credit cards is to be careful how much of a balance you have on it. If the balance is too high in relation to your limit, then they'll start subtracting points. It's all a game, really.

I was adressing the title of this thread "credit cards and ratings". Financing large purchases (cars / houses) are different and if you are living within your means you can get the loan without a credit card history / rating , sometimes easier in fact (too many credit cards look bad too, even if the balance is 0 ).

I am throwing a cautionary note , credit cards and a good "credit score" is not necessarily a goal one should set out to achieve. If you are living within your means , almost by definition, your credit score will be good and a good credit score will not allow your to live beyond your means. Taking out a credit card debt will, however, make others wealthy.

[shredkingj]

I agree with you 100%. I didn't even know what my credit score was until I bought a house this year. I had happened to put a few hundred dollars on my credit card, which I paid off the same billing cycling, but when they pulled my credit, that balance was still on there. My credit card has a very low limit, because I don't like credit cards, so it affected my score negatively (but not enough to make difference).

[benj1]

I was adressing the title of this thread "credit cards and ratings". Financing large purchases (cars / houses) are different and if you are living within your means you can get the loan without a credit card history / rating , sometimes easier in fact (too many credit cards look bad too, even if the balance is 0 ).

I am throwing a cautionary note , credit cards and a good "credit score" is not necessarily a goal one should set out to achieve. If you are living within your means , almost by definition, your credit score will be good and a good credit score will not allow your to live beyond your means. Taking out a credit card debt will, however, make others wealthy.

nothing will allow you to live outside of your means for ever (except rich parents and an ever inflating housing market perhaps), credit cards are fine (as with all other kinds of debt) if you use them properly. ie using them for the protection they afford or for cash flow, they aren't good for long term borrowing.

i have to disagree about not needing a credit score, if you don't have a credit rating how are lenders to gauge whether you are likely to pay the money back or not, yes you may be able to get a loan or mortgage (much less likely in the present climate), but it won't be the best, in which case you will end up giving more money to banks.

the key is to be sensible, use a credit card for normal spending, not things you wouldn't normally be able to afford, use an overdraft or credit card for the unexpected emergency that you can't pay for until next pay day, use a mortgage to buy a house that you can afford long term, i suppose the trick is to remember that the money isn't your own, its the banks, and sooner or later it will have to be returned, and you will have to pay for the privilege.

[rajeev1204]

nvm

[bodhi.zazen]

i have to disagree about not needing a credit score, if you don't have a credit rating how are lenders to gauge whether you are likely to pay the money back or not, yes you may be able to get a loan or mortgage (much less likely in the present climate), but it won't be the best, in which case you will end up giving more money to banks.

Well we will have to agree to disagree then. I did not say the banking industry does not need a credit score. I said the credit rating system is by and for the banking industry and that you should not try to play games with credit cards trying to increase your score.

I suggest you confirm your hypothesis with a financial adviser, you may be surprised at the advice you receive from a professional (of course it depends on how you phrase your question).

In general, most financial advisers advise you pay off debt, live within your means, and do not worry about your credit score.

[Blacklightbulb]

I am going to be the stick in the mud. Who needs a credit score?
A credit score is really an "I love debt score"
Some of the most successful people have a zero credit score because they do not go into debt.

My wife and I pay cash for everything and have no credit cards. We save up our money to buy major purchases. Before anyone thinks we are rich or anything, we would be classified middle class at best.

The only debt we have is a home mortgage and you do not need a credit score for a mortgage. The key is to find a lender that does manual underwriting. In other words the lender looks at you as a person, your job history, your income rather then just looking at how much debt you have piled up.

I'm with you on that one. No matter what, don't get in debt. Don't get into unnecessarily contracts and keep control on you money.

[markbuntu]

If you do not have a credit history, you will not have a credit rating. You will be a "ghost". This can make it very difficult for you to rent an apartment or buy a car wthout a very large down payment.

My advice, use the card, but not a lot, not for every day items unless you get points. That makes it look like you never have any cash. Not a good thing, junkies never have any cash. Use it for larger purchases but not necessities. Furniture, OK, occaisional nights out, OK. rent, not OK. Use it regularly, at least 3 or 4 times a month.
Pay it off immediately.

Every six months your credit limit will be increased and in 3 years you will have a very solid credit rating. It takes 3 years of credit history to get a good rating regardless of anything else. Do not get any more credit cards for at least 2 years.

I paid cash for everything for years and never had a credit card and then when I went to buy a new car I had no credit. If I had not paid 1/2 down in cash, I would not have got a car at all. To top it off, I am self-employed and so had no prooof of income either. But, it was a Saturday and the bank was closed and the dealer was not going to let me walk away with all that cash lying on the table. We made the deal. They called on Monday to tell me the bank wanted another 2% interest because of my sketchy credit and income. I said "it's too late for that." Got my new car on tuesday.

Now my credit rating is stellar. I have a few cards that I use occaisionally to keep the rating up and I always pay them off immediately. Someday I might really need something that my immediate cash circumstance precludes.

If you have a mortgage, no matter where from, and pay it without fault, you have great credit. If you are just starting out in life, you need to start from being a ghost.

[HappinessNow]

Hey bit of a generic question

I have decided to start using my credit card for my day to day transactions in order to build up a credit rating. Does anyone know if a credit rating will increase if one treats the credit card like a debit card and keeps a positive amount of money on it, or are you required to be in debt and then repay for the credit rating to improve.


cheers

xir


Credit card ratings are by and for the credit card industry.

The only winning move is not to play. Learn to live within your means, have you learned nothing from the economic meltdown ? It does not matter if your income in in 2, 3, or 7 digits, if you live outside your means you will regret it.

People do not accumulate wealth with credit, lol.

Agreed!...Credit Card companies are analogous to being modern day Slave Masters, many consumers find themselves deep in debt, enslaved by the convenience of credit.

bodhi.zazen said it best:




The only winning move is not to play.

You would be better off opening a checking/savings account at your local Credit Union instead and establish credit through them. I am sure they will even have a financial adviser on hand to counsel you.