Using a credit card to improve credit rating

fasttalkerchat

My credit record is very thin. I have had 2 credit union loans that were paid off, one very early and the other a bit late.
I never used credit cards or had any other debt.
I want to use a credit card to give myself a good credit rating in preparation for getting a mortgage.

My thinking is that I should pay off the credit card in full before the due date.
However, I'm reading advice that I should pay less than the full amount but more than the minimum amount so show "utilisation".

Is anyone familiar with credit scores who can advise?

wench

Pay it off in full, there is no advantage to carrying a balance & paying unnecessary interest.

unclebill98

Having a CC debt will do you no favours. It will simple show you are living beyonds your means.

Pablo1802

What a nonsense.
Having and using properly credit card doesn't mean falling into debts. More than this, it would definitely be in your favor. You won't pay any cent for interest (except annual goverment stamp duty for holding credit card account) if you pay your card always in full and on time.
Using credit card in that situation increases your credit worthiness/credit scoring definitely (check ICB website www.icb.ie)

unclebill98

The OP has stated they think that not paying the full amount but more than the min shows "utilisation". So they do fall into a debt, is that debt manageable is not known as we don't exactly know if its a few euro or hundreds.

They have asked about this in regards to a mortgage. I can state that a CC is not exactly the best thing to have for a mortgage application and certainly not seen as a advantage. Reg savings would serve a mortgage application much better than spending money you don't earn by using a credit card.

Even if the CC debt was paid off in full its still a form of borrowing and at some stage you lived beyond your means. DSR, death service ratio is the key to a mortgage application.

So, in other words its most certainly not nonsense.

Pablo1802

"Even if the CC debt was paid off in full its still a form of borrowing and at some stage you lived beyond your means"

That's not logical and not true. If you are sure you have to enough funds to cover all credit card spendings in next month cycle, it doesn't mean you live beyond your means.
In many cases you might get some profits from credit cards, like extra tesco points etc...
Maintaining a good credit card account does improve your credit worthiness/credit scoring for sure.

Everything depends on your personal circumstances.
If fasttalkerchat wants to apply for a mortgage in next month, obviously there is no point to get a credit card, but if he's planning to get a mortgage later then he can apply for a credit card with a basic credit limit 500-1000. It's under one condition - credit card account must be operated without any breaches of cc terms&conds.

Maintaining a good saving account is a great option but it doesn't impact your credit worthiness.

Blingy

I would advise if you have no current need for a cc then don't get one. I cannot see how a cc would increase your chances of getting a mortgage.
A solid regular savings account and money in your current account at the end of every month is much more important.

Pablo1802

" I cannot see how a cc would increase your chances of getting a mortgage. "

As I wrote above - Maintaining a good credit card account does improve your credit worthiness/credit scoring for sure.
It shows your good ability of credit product personal management, which is very important for any bank.

To be honest, there is no chance of getting a mortgage if your credit scoring calculated by bank is too low.
Credit card or saving account will not help if you don't meet lending criteria for a mortgage provided by bank.

Nino Brown

OP, everything you were thinking is correct for the US, but I'm not so sure about Ireland. In the US you're better to have a balance on your credit card, having a zero balance will not negatively affect your credit rating, but if you have no credit, you're credit rating will not increase either. To increase my rating score in the US, I would make purchases of about 30% of my limit, and pay it down over 3 months, and my score increased for a while, then doing that made no difference anymore. In the US your rating affects mortgage, card limits, even how much you pay for car insurance. In Ireland very little affects your rating, and your rating affects very little.
So I doubt it works that way here, our credit rating system is far less complex and far reaching that the US system.

Blingy

Pablo1802 wrote: »

" I cannot see how a cc would increase your chances of getting a mortgage. "

As I wrote above - Maintaining a good credit card account does improve your credit worthiness/credit scoring for sure.
It shows your good ability of credit product personal management, which is very important for any bank.

To be honest, there is no chance of getting a mortgage if your credit scoring calculated by bank is too low.
Credit card or saving account will not help if you don't meet lending criteria for a mortgage provided by bank.

But getting a cc 6 months or so before applying for a mortgage IMO would not be advantageous at all. Presumably the credit scoring would either not count it (too short time scale) or see it as a negative. There are other ways to prove your credit worthiness.

Pablo1802

"But getting a cc 6 months or so before applying for a mortgage IMO would not be advantageous at all. Presumably the credit scoring would either not count it (too short time scale) or see it as a negative. There are other ways to prove your credit worthiness"

That's correct and I have to agree with u.

smcgiff

Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious.

This is because the bank knows you have an existing credit line open to you that you may abuse.

So, don't get a CC to improve your chance of getting a mortgage, build up your savings.

Blingy

smcgiff wrote: »

Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious.

This is because the bank knows you have an existing credit line open to you that you may abuse.

So, don't get a CC to improve your chance of getting a mortgage, build up your savings.

+ 1

Pablo1802

"Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious."

It must be a joke to write such things.

Most credit cards across the world have very similar rules.
If any bank in Ireland have thought the same as you, all credit cards would have withdrawn from their credit product offers.
CC is very bad thing for people without a knowledge about credit card as a specific credit product itself.

smcgiff

Pablo1802 wrote: »

"Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious."

It must be a joke to write such things.

So, you've a 5k credit limit on your 15% or higher credit card account and even though you've always paid off your credit card every month you think banks will not take this into account, especially now that you've a brand new shiny house to decorate for the first time?

If it's a joke I'm failing to see the punchline.

Nino Brown

Pablo1802 wrote: »

If any bank in Ireland have thought the same as you, all credit cards would have withdrawn from their credit product offers.
CC is very bad thing for people without a knowledge about credit card as a specific credit product itself.

What are you talking about? Banks could easily see credit cards as negatives for a mortgage application. If you have loans it will also stop you getting a mortgage, it doesn't mean banks are going to stop giving out loans.
Credit is their business, be it cards, loans or mortgages, but any of those can prevent you from getting another.

Pablo1802

"So, you've a 5k credit limit on your 15% or higher credit card account and even though you've always paid off your credit card every month you think banks will not take this into account, especially now that you've a brand new shiny house to decorate for the first time?

If it's a joke I'm failing to see the punchline"

But is it a bad thing? I don't think so;
What is a 5k if you need much more with a mortgage.
Especially if you meet all mortgage conditions/have a great credit scoring.
And that's the point.

smcgiff

Pablo1802 wrote: »

And that's the point.

No it's not. A credit score is only one of the criteria a bank looks at.

And it's not a guarantee of a future credit rating. It just means you've been a good boy or girl up until you applied for your mortgage. Banks know you're most likely going to be good up until you get the mortgage and by golly wouldn't that leather sofa look divine in the sitting room.

BuffyBot

Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious.

In general Ireland, perhaps. In a bank, not so much.

People are looking for absolutes. The banks have come along way in the last few years. While the ICB score is one part of a mortgage application, responsbile financial behaviour and planning will also factor.

A well managed credit product will have an eventual effect on your credit rating, but well managed is something many don't do. We're not here to judge the OP's ability however, that's only something they can decide for themselves.

coylemj

smcgiff wrote: »

Having a CC in Ireland is seen as a bad thing, even if you clear the balance off each month. Banks are being uber cautious.

Total rubbish. How are you supposed to buy airline tickets or a holiday or buy anything online if you don't have a CC?

Having a CC and clearing the balance every month on time shows that you are able to manage your spending and are living within your means, precisely the discipline that the bank wants to see when it comes to assessing your risk for a mortgage or car loan.

Pablo1802

Nino Brown wrote: »

What are you talking about? Banks could easily see credit cards as negatives for a mortgage application. If you have loans it will also stop you getting a mortgage,.

What an absurdity. Friend of mine got a credit card account opened since few years and he was approved for a mortgage some time ago without any issues.

Nino Brown

Pablo1802 wrote: »

What an absurdity. Friend of mine got a credit card account opened since few years and he was approved for a mortgage some time ago without any issues.

Of course, because he probably has a a history of managing it well, over the long term it's a good thing to able to manage credit cards and loans, that's how you get a good credit rating. Having a card for a short time will not give you a good credit rating, but banks may see it as a liability, so short term, credit cards can be seen as a negative.

smcgiff

coylemj wrote: »

Total rubbish. How are you supposed to buy airline tickets or a holiday or buy anything online if you don't have a CC?

Visa Debit?

I'm not saying it's impossible to get a loan out when you have a credit card. That would be silly.

ANY other loans or loan facility will hamper your ability to get a further loan.

Pablo1802

smcgiff wrote: »

ANY other loans or loan facility will hamper your ability to get a further loan.

Cant agree again.
The clue word for any kind of borrowings is a credit scoring, which is mainly associated with an income/outgoings and also with a credit history/payment history.

coylemj

smcgiff wrote: »

ANY other loans or loan facility will hamper your ability to get a further loan.

Only if they are still outstanding and that fact gives rise to concerns that you might not be able to handle the repayments on a new loan. Getting a loan and paying it off according to the agreed schedule is the only way to get a good credit rating. Stuffing thousands into a savings account does absolutely zero for it because all lenders care about is your ability to meet loan repayments.

One way to deal with the CC issue would be to agree with your bank that they could reduce the spending limit on the CC (and/or an overdraft facility on your current a/c) as part of a deal to get a new loan but if you have a history of clearing the bill every month, that should not be necessary.

smcgiff

Pablo1802 wrote: »

Cant agree again.

I'll get over it.

smcgiff

coylemj wrote: »

Only if they are still outstanding and that fact gives rise to concerns that you might not be able to handle the repayments on a new loan. Getting a loan and paying it off according to the agreed schedule is the only way to get a good credit rating. Stuffing thousands into a savings account does absolutely zero for it because all lenders care about is your ability to meet loan repayments.

One way to deal with the CC issue would be to agree with your bank that they could reduce the spending limit on the CC (and/or an overdraft facility on your current a/c) as part of a deal to get a new loan but if you have a history of clearing the bill every month, that should not be necessary.

The advice re savings was relating to a deposit re a mortgage. Think they're still a requirement.