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Can your credit rating drop if your good with finances?

Discussion in 'General Discussion' started by TheOracle, 1 May 2019.

  1. TheOracle


    Joined: 30 Sep 2005

    Posts: 13,204

    Here's a strange one,

    I had one credit card and a small loan. Over the past few months I have been paying the loan off in big chunks and it's now paid and settled. I also swapped my credit card over to a 0% one before cancelling it, and I've then been paying off large chunks each month. So basically I've gone down to just having one credit card with a couple of grand on it.

    Seems my credit rating has dropped from 997 to just over 900?

    I'm not too bothered at this stage as my motivation for getting these paid is to then divert my surplus into mortgage overpayments ready to move house in a few years.
    Last edited: 1 May 2019
  2. VincentHanna


    Joined: 30 Jul 2013

    Posts: 22,865

    Loads of things can affect it, including things like cancelling credit cards.

    But don't get too hung up on the number. If it had dropped down to 100 i'd be more worried.
  3. David Flett

    Wise Guy

    Joined: 14 Dec 2017

    Posts: 1,738

    Location: Aberdeenshire

    Could be the number of hard searches in a small amount of time?
    After a few month it’ll start going up again, after about 6 it should be back to where it was.
  4. Mr^B


    Joined: 25 Nov 2002

    Posts: 3,434

    Depending on where you get your credit rating from the reason is probably:

    1. An increase in the number of credit applications (ie. you now have ONE in the last 6 months)
    2. If your new 0% card has a lower limit than the old one, your overall credit utilization will have gone up, and if that's more than a certain percentage, it'll hit your credit rating.
  5. TheOracle


    Joined: 30 Sep 2005

    Posts: 13,204

    ah, that actually makes sense as the 0% card only has enough room to hold the balance transfer. The original card had loads of room left, whereas the new one was at 99% before I made a couple of payments. Even though my overall level of credit has drastically reduced.
  6. The_Abyss


    Joined: 15 May 2007

    Posts: 12,805

    Location: Ipswich / Bodham

    Being a slave to a largely arbitrary number is absolutely pointless. The credit companies have successfully 'gamified' this rating so now people really care when they shouldn't, and are acquiring all sorts of data to sell more effectively as a result.
  7. TheOracle


    Joined: 30 Sep 2005

    Posts: 13,204

    well it's the debt number I'm more concerned about :D
  8. VincentHanna


    Joined: 30 Jul 2013

    Posts: 22,865

    I get a free update from Barclaycard every 3 months, but I don't pay much notice to it, it's generally between 997 and 999.

    For affordability of things like Mortgages and the like, it only one small factor.
  9. montymint


    Joined: 29 Jul 2006

    Posts: 4,769

    Location: Newcastle, UK

    also by cancelling a card your overall usage of credit goes up (assuming you have a balance on the remaining card), which i believe has an impact on socre.

    But 900+ is a great rating, nothing to worry over :)
  10. touch


    Joined: 28 Oct 2006

    Posts: 11,892

    Location: Sufferlandria

    I don't think credit rating has any effect on affordability?
    Affordability is based on income and outgoings and will determine how much you can borrow. Your credit record might effect whether you get accepted for the mortgage or not.
  11. VincentHanna


    Joined: 30 Jul 2013

    Posts: 22,865

    Sorry, that's what i meant.
  12. 413x


    Joined: 13 Jan 2010

    Posts: 21,845

    Location: Llaneirwg

    Yeah these things swing all time

    Closing account can go download
    Opening account usually down
    Application down

    But as others have said, anything in 900 is nothing to worry about otherwise no one would open any accounts!
  13. BowdonUK


    Joined: 17 Jan 2016

    Posts: 4,962

    I think they like you in debt and paying it off to have a good credit rating.
  14. Freakbro


    Joined: 29 Jul 2010

    Posts: 18,915

    Location: Lincs

    Because it shows you can manage credit.

    You wouldn't get much of a rating if you had never had any debt for them to assess your ability to manage it.
  15. lookitsjonno


    Joined: 10 Sep 2003

    Posts: 4,318

    Location: Midlands

    I fell into this trap by canceling an unused card, and couldn't get a big enough balance transfer offer on my other one a few weeks later. Now I leave a card with 5k limit with 0 balance active, which reduces my debt utilisation.
  16. paradigm


    Joined: 26 Aug 2003

    Posts: 36,661

    Location: Staffordshire

    As above, i keep a number of large balance cards with nothing on them just so my credit utilization stays low, even if i need to use a card in an emergency.

    My experian “score” seems to change with the wind however. So far this year its been 999, 991, 999, 991 and now 999 again, with no hard searches or applications in that time. That said, the experian “score” as meaningless as it is, at least makes more sense than the other agencies who always seem to score me as a 3 or 4 out of 5 which goes against what experian think (and what my experiance of getting good credit rates shows).

    In short, I don't think the “score” is particularly relevant at all. As long as you are managing your money/debt correctly, on time, and the affordability fits, then you’ll be accepted for the better credit deals more often than not.
  17. phrases


    Joined: 11 Jul 2011

    Posts: 750

    Some lenders don't even view your credit score as a decision maker. Its classed on how you pay back things and your credit behaviour what they are interested in the most. For instance the high % lenders won't lend to you if they see you pay everything off each month etc. But if you are like that then you wouldn't be looking for a loan from sharky loans etc :D
  18. Greebo


    Joined: 20 Jan 2005

    Posts: 39,141

    Location: Co Durham

    Yes, if you spend almost up to your credit card limit and pay it off every month you will have a higher rating than somebody who doesnt use their credit card at all.
  19. Double07

    Wise Guy

    Joined: 10 Jan 2006

    Posts: 1,630

    Location: Scotland

    Or taking out credit cards :)
  20. Haggisman


    Joined: 6 Oct 2004

    Posts: 13,973

    Location: Birmingham

    Average age of account is a factor as well according to MSE, a long running account shows stability of finances, closing down an old account and opening a new one is obviously going to bring that average down significantly