Worth getting a credit card just to improve credit rating? Watch

Wookie42
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As the title reads, I heard someone talk about this yesterday - he has a credit card which he buys only a few things with (expensive, one off items like a new TV or whatever). He claims its because it will help him build a better credit rating or something as he's only 18. I'm sure I've heard this before, but as the extent of my knowledge when it comes to finance is what a debit card is I have no idea.

Any thoughts? Is it worth getting a credit card just to do this?
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Tariq786
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My cousin is getting one for this very same reason. But i advise you or anyone to be careful.
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No Future
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If you can stay in control of your spending and pay it off every month, go for it.

Also choose one that rewards you
Last edited by No Future; 7 years ago
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SharkofMirkwood
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Yeah, most people say it's better to have credit card payments that you've paid off, than to have never used a credit card before.
Doesn't seem fair i guess, but that's just how it works. Lets anyone you're applying for a loan with (or a job sometimes?) see that you actually can pay back...
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Slick 'n' Shady
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if you do, overcompensate.
Pay more than the balance. Not the minimum, not the full amount, more.

It will show on your card as (for example) -£450.57

Then set up a standing order to put in £100 or whatever you envisage on spending on it per week.
This way you will always be in credit and automatically paying everything off.
Of course, check your account at least once a fortnight.
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callum9999
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(Original post by No Future)
If you can stay in control of your spending and pay it off every month, go for it.

Also choose one that rewards you
At 18 with little/no credit history, it's almost impossible to get a rewards credit card.

(Original post by SharkofMirkwood)
Yeah, most people say it's better to have credit card payments that you've paid off, than to have never used a credit card before.
Doesn't seem fair i guess, but that's just how it works. Lets anyone you're applying for a loan with (or a job sometimes?) see that you actually can pay back...
It's not just most people - it's anyone who knows how credit reporting works. It seems very fair to me. If you want to lend someone money, who are you more likely to lend to: someone who has borrowed before and has a track record of paying it all back on time, or someone you know nothing about?

(Original post by Slick 'n' Shady)
if you do, overcompensate.
Pay more than the balance. Not the minimum, not the full amount, more.

It will show on your card as (for example) -£450.57

Then set up a standing order to put in £100 or whatever you envisage on spending on it per week.
This way you will always be in credit and automatically paying everything off.
Of course, check your account at least once a fortnight.
Don't pay more than the balance. It's against the terms and conditions of many credit cards (some will just write you a cheque and get rid of the credit on there - you are never meant to be in credit) and even if it isn't, there's no point at all in doing that. Then there is the grey area in which you may not be eligible for any protection etc. on that money. Common sense would be to set it up to pay off in full each month by direct debit. I can't think of a single benefit to being in credit?
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kpwxx
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Yeah this whole credit rating thing annoys me, but it has to be done to get a lot of things nowadays.

I thought about getting one (when I have a proper income, not a student one!) to pay one thing on... say my phone bill or something, something that I know I can pay every month.

That's another way to build the rating- getting a contract phone!

As long as you trust yourself not to abuse the card and know you can pay every month on time then it's a good idea I think (although I'd rather not risk it anyway if I didn't have to!).

Also they can be good for safety. I heard that if you pay for a holiday by cash then the company goes bust and isn't protected, you have no protection. If you pay with a debit card you can claim back the amount you paid on the card, but if you pay even the smallest fraction of the total holiday cost on a credit card, you can claim back the whole cost- not 100% sure on these facts but it's something like that, and that sounds like pretty good protection to me!
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Slick 'n' Shady
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(Original post by callum9999)
At 18 with little/no credit history, it's almost impossible to get a rewards credit card.



It's not just most people - it's anyone who knows how credit reporting works. It seems very fair to me. If you want to lend someone money, who are you more likely to lend to: someone who has borrowed before and has a track record of paying it all back on time, or someone you know nothing about?



Don't pay more than the balance. It's against the terms and conditions of many credit cards (some will just write you a cheque and get rid of the credit on there - you are never meant to be in credit) and even if it isn't, there's no point at all in doing that. Then there is the grey area in which you may not be eligible for any protection etc. on that money. Common sense would be to set it up to pay off in full each month by direct debit. I can't think of a single benefit to being in credit?
Not against the terms of American Express.
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Slick 'n' Shady
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(Original post by kpwxx)
Yeah this whole credit rating thing annoys me, but it has to be done to get a lot of things nowadays.

I thought about getting one (when I have a proper income, not a student one!) to pay one thing on... say my phone bill or something, something that I know I can pay every month.

That's another way to build the rating- getting a contract phone!

As long as you trust yourself not to abuse the card and know you can pay every month on time then it's a good idea I think (although I'd rather not risk it anyway if I didn't have to!).

Also they can be good for safety. I heard that if you pay for a holiday by cash then the company goes bust and isn't protected, you have no protection. If you pay with a debit card you can claim back the amount you paid on the card,
but if you pay even the smallest fraction of the total holiday cost on a credit card, you can claim back the whole cost- not 100% sure on these facts but it's something like that, and that sounds like pretty good protection to me!
Yes, this is true. But you have to weigh this up, how likely is it a major holiday company will suddenly go bust?
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A.galloway
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(Original post by Slick 'n' Shady)
Yes, this is true. But you have to weigh this up, how likely is it a major holiday company will suddenly go bust?
Externally they may look solid and respectable to the average customer but internally they could be ravaged with debt and other problems. It is highly unlikely but still it is at least some coverage.
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Jmzie-Coupe
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(Original post by Slick 'n' Shady)
if you do, overcompensate.
Pay more than the balance. Not the minimum, not the full amount, more.

It will show on your card as (for example) -£450.57

Then set up a standing order to put in £100 or whatever you envisage on spending on it per week.
This way you will always be in credit and automatically paying everything off.
Of course, check your account at least once a fortnight.
Paying more than the balance is just simply stupid. It defeats the whole purpose of a CREDIT card, and on the majority you can't pay more than the balance.
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silverbolt
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(Original post by No Future)
If you can stay in control of your spending and pay it off every month, go for it.

Also choose one that rewards you
This, use it to get something small like a pizza or something then pay it off every month, it will help build up your credit rating
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SpiritedAway
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Someone I used to work with did this, but would just buy a mars bar or something and pay it off every month. I would never do it though :/ I realise having no credit rating is just as bad as having a bad credit rating, but I know I am bad with money and having a credit card there is too tempting for me
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The Procrastinator
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I always thought the banks liked the people that always got into debt...because they make money off them.
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mother_eve3088
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(Original post by Slick 'n' Shady)
if you do, overcompensate.
Pay more than the balance. Not the minimum, not the full amount, more.

It will show on your card as (for example) -£450.57

Then set up a standing order to put in £100 or whatever you envisage on spending on it per week.
This way you will always be in credit and automatically paying everything off.
Of course, check your account at least once a fortnight.
On this note - can anybody recommend a good credit card to start with?

Say at age 21+?
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Jmzie-Coupe
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Depends what you're earning. What are you earning?
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Gowrav
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I was wondering about this as well. But what my uncle told me is that it doesn't really matter that much. Especially if you have a good job and earning x amount they are bound to give you a good loan (unless you have bad credit rating).
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callum9999
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(Original post by Slick 'n' Shady)
Not against the terms of American Express.
Ok, but firstly there is an almost zero chance that they will be able to get an American Express with no credit history. And more importantly, there is absolutely no reason whatsoever to keep making your credit card go in credit. It can cause issues and defeats the entire purpose of having a credit card. Plus there is not a single benefit for doing that.
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shadow99
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Getting a credit card is a very bad idea, unless you are really careful its very tempting to max out the card buying stuff you don't need.

A few years down the line you could end up heavily in debt !
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callum9999
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(Original post by shadow99)
Getting a credit card is a very bad idea, unless you are really careful its very tempting to max out the card buying stuff you don't need.

A few years down the line you could end up heavily in debt !
Or, a few years down the line you could be in exactly the same position you're in now but with a good credit history. Just because you aren't responsible with money, doesn't mean everyone is. I've had credit card limits of up to £3k and the same with overdrafts for almost 2 years - never had a single problem with it.
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