Not sure if this is the right place for this post but seemed the most suitable.
I am currently rebuilding my credit after getting into bad debt and coming put of an IVA. I have 1 year left before my IVA drops off my report and there is nothing else on my report that is bad.
However what I am looking to do now is to squeeze every ounce of credit building I can at the moment I am looking at total credit compared to available credit and have some questions.
I currently have a credit card with a 250 limit and one with a 800 limit. Each month for the past year at least I have been using these credit cards fully and then paying them off in full each month so it show I am using credit and also I am paying it off so don't get any interest charges each month.
I have however got myself into a situation where I do not need to use these Credit Cards anymore and have the money to fully pay both off and close the account. However before I do this I want to check what is the best option for my Credit Rating.
Option 1 - Pay both off and close accounts which good point is I cant spend on them but bad point may be my Available Credit on report goes down and also I am not using credit which essentially is hat builds your credit report up I am led to believe.
Option 2 - Pay both off and close the 250 limit one and reduce the 800 one down to around 200 which I will continue to use. Again good points are I have closed one credit card and removed 600 credit from the other so cant spend it however again my available credit would go down on report
Option 3 - Pay both off and only use 200 of one but means I will have all the available credit not used looking good on my report and I am still using some credit but then the money would still be there available to me so would need good will power not to spend it
So I am wondering which option is best or is there another option or in fact is there not much difference in doing any of them.
I'm a little confused as the first part of your post says you are using your credit cards fully and paying them off each month, then further down it says your £800 one you are able to reduce the balance to £200 only?
I don't think it's good for your credit rating to be spending up to your limit every month even if you are paying it off in full each month, personally I wouldn't close either, but I wouldn't spend up to your limit each month, I would just say put a couple of tanks of petrol on there and pay it off each month but don't go near your limit as it looks like you're overstretching yourself
Sorry for the confusion. What I meant was quite a few of my bills are not direct debit so I would pay the balances off each month and then use the available credit on the credit cards to pay off all my bills and so on each month.
However I do not want to be dependent on Credit cards anymore so I am going to pay both balances fully off but I presume if I don't get the balance closed or reduced it will show on my credit file as available credit(which I am not using) and then if like you suggest just spend petrol or so on either and pay off the amounts used in full it will show I am using credit.
It would depend a bit on why you want to push your credit rating as high as possible as fast as possible.
If you are looking for mortgage/remortgage I can understand that but if you want it as high as possible because you wanted a normal loan then having little credit available to you and not using it may go against you.
Vanquis have just raised my limit again to £1750 and I understand the temptation but 5 years of the IVA has brought all that under control so it get's used and paid off. I see my credit rating rising due to this and other positives on my report with the negatives dropping off month by month.
As an example November 2011 (Last month of IVA) = 207, November 2012 = 458 and the last 4 drop off in December.
One piece of advice I would give, is open an instant ISA or something like that and pay into it an amount that equals the total credit limit you have on your cards. So in your case put £1000 into it and leave it there. I would have hoped that since you're not paying your IVA anymore that shouldn't be too difficult.
If your Credit Limit goes up, save some more in that account to bring it up to that new credit limit.
That way you are 100% covered in cash if you suddenly on a whim see the thing you always wanted. Use the card, pay it straight of from the savings account and then build up the savings account again.
Last edited by herbekj on Mon Nov 26, 2012 2:13 pm, edited 1 time in total.
Last Payment - November 2011 - Completion Certificate received 2 weeks after last payment, Removed from Insolvency Register within 4 weeks after last payment.
Have you considered one of the pre-paid card accounts with the 'Creditbuilder' facility? Have a look at the websites for 'ClearCash' and 'Cashplus' for a full explanation as to how it all works.
Might be a better option than paying credit card interest and risking getting into debt again.
Good luck.
My opinions are just that: Based on my experience and being a self-employed IVA customer.
Those are ok in your first year out of the IVA to get 12 months of positive posts to your credit rating but you still technically pay a fee for them as you have to sign up for the £4.95 a month fee (Cashplus).
Longer term a real credit card is a better solution as why pay a fee per month for a card that you have to load up. If you had the cash just use a debit card in the first place and if you have the cash just use a real credit card and pay it off.
Last Payment - November 2011 - Completion Certificate received 2 weeks after last payment, Removed from Insolvency Register within 4 weeks after last payment.
Sorry it has been a while I have been on here but seen your replies so thank you.
Worryingly however I rang credit expert to cancel my membership as I knew I was not going to start checking it again until Nov when IVA drops off and found out some bad news.
Apparently the woman checked my file and said I had a delinquent account on there. When probed more she said an old bank account I had was registered as 3 payments late in 3 rolling months and even though that is paid off now(back in 2010) it will stay on file for 6 years and will be as bad as a default.
Also an old orange bill I had over the 5/6 years I had it had 21 late payments registered but again she advised would look bad even though that is fully paid off too.
Can anyone confirm this is as bad as she is saying if wanted to try for a Mortgage next year?
these late payment /defaults will remain on file for 6 years -even if now paid off. Which may/will have an effect on future borrowing. Each lender sets their own lending policy -
Was the Orange phone account part of your IVA - if so you could get the defaults moved to the start of your IVA - then they will drop off with the IVA
Last edited by ginger323232 on Sat Jan 26, 2013 4:02 pm, edited 1 time in total.
So if looking for an mortgage - it may be better to go directly to a whole market broker - also despite you finishing an IVA, (from personal experience) One account (RBS) and Co-op will dismiss an mortgage application from ex ivas
None of these were part of my IVA and stupidly got into trouble after I was in my IVA with these accounts.
I was aware they would likely stay on my file for 6 years but was not aware they would make as much impact as a default.
In terms of Banks refusing anyone for being in an IVA my understanding was one it falls off after 6 years it is gone and the only people who can see it or hold it against you would be the companies that were in the IVA as they could still have it in their internal records?
I think I was going to speak to the Mortgage adviser on here when ready to look for a Mortgage to see where I stand.
On the mortgage application front: Any lender you have had dealings with will keep records for a minimum of 7 years after the end of your relationship with them ( the end of the IVA, if they are in it). Members of the same group of companies might also have access to that information.
Some companies also, it is emerging, either seem to have access to, or keep snapshots of the Insolvency Register and / or CRA files on a historic basis. However, this is just a theory.
Finally, many used to ask, "Have you ever been made bankrupt?" to which you could answer "No". Now they seem to be asking, "Have you ever been made bankrupt, or made any arrangement for payment?" Which covers IVA's and must be answered "Yes".
Of course, you could take a gamble and reply to the negative -- but that would be a fraudulent application which, at best, will result in the termination of the mortgage, if the truth be discovered .... Not worth the risk.
So, yes, approach a whole of market broker like Ryan and everything will be upfront and out in the open. Some lenders are more understanding than others.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
More crucially - how much of a deposit do you have % wise? From what you have written it doesn't look goos on paper, the fact that you were still financially in difficulties even during the IVA so maybe you do need to wait a while longer. TBH, I am confused about how you use your credit cards - I pay mine off in full when the statement comes no matter what is on them. As long as you do that I would say keep them - it shows you can manage credit.
RHB - I am looking to go for a Mortgage next year, probably about January time and on my current savings will have at least 15k but could boost that to 20k if needed and the houses we are looking at are about 120k
As said I have 2 credit cards, one for 250 and one for 800 however I only really use them now for credit building as in I work out my non direct debit bills and pay the money from my wages to both these cards and then pay the bills with these. I was in a position where I had to pay the money on to them to clear them and then use as bills but now I am in a position to pay both off and not use them for bills so cleared.
However I likely want to keep one and pay off in full every month to keep some sort of credit history but then get rid of one of them.
Stupidly I did get into trouble when still in IVA not because I was struggling with money but because I was careless really with managing my money however these issue were back in 2010 around the same time I paid off my IVA and managed to clear orange and close my santander I was having issues with.
I am no idiot and do not blame anyone else for my troubles and think myself very lucky that I could enter an IVA which taught me about managing money and also saved me a lot of money going towards my debt so I see myself as very fortunate.
But I am now just wanting to know what place I am in. I know what situation I will be in when IVA drops off and apart from the Santander and orange account my File looks good in terms of doing all the right things like electoral role, no searches, using credit in a correct way, used credit low compared to available credit etc.
I suppose in summary my position will be when looking to get a Mortgage:
- Joint Mortgage
- 15k-20k Deposit
- Partner clean credit file apart from will have 2 defaults for around 500 which were defaulted in 2011(now fully paid off)
- Myself clean credit file apart from Delinquent Santander account from 2010 and Orange late payments from 2010
- IVA dropped off file in November 2012
Again I know a lot can happen from now until January both good and bad but I want to make sure I am doing everything I can to be in the best possible place when going for a Mortgage.
