Credit cards and credit ratings

Hello,
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So, having a credit card, using it and paying it off gives you a good credit rating.
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If I have a credit card with a decent size limit and a two-year interest free offer when I took it out it makes sense to only pay the minimum and, if I have it, keep the money I would use to pay it off in an ISA or whatever until the two years is up and then pay it off.
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Does only paying the minimum each month adversely affect a credit rating?
When applying for a (re)mortgage would having a maxed-out credit card count against you if you also had an equivalent amount of liquid assets?
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Cheers

Does only paying the minimum each month adversely affect a credit rating?

No, it shows you are paying the debt minimum so not adversely affecting your rating.

At least it was that way… I’m not up to speed on the current ratings since a lot of them are individual to providers… and those rating companies have different ratings to those they supply to.

Stoozing.

Requires dicipline

But an easy way to earn next to nothing.

Does only paying the minimum each month adversely affect a credit rating?

Yes it can do. Some credit scoring agencies look at how much of your limit you’re spending each month as a percentage (ie you get a better score if you stay under a certain percentage of the total credit available to you), and they do increase your credit score if you’re paying off all or a significant amount each month.  and if the amount of debt continues to go up, and isn’t being significantly dented by payments, it can effect your score

Hmm. So even if it doesn’t make sense to pay it off it may cause problems?
How would a mortgage co view having a debt and an asset when remortgaging, do they just net off?
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Stoozing.

Requires dicipline

But an easy way to earn next to nothing.

Didn’t know there was a name for it. I’ve got mine in premium bonds rather than an ISA so instead of earning next to nothing I’ve earned exactly nothing.

Short answer is maybe… it depends on the lender and how sophisticated their policy/systems are.

They will/should be able to see that you have a cc with a balance, but that it’s on a promotional rate, they will also see that you are meeting your obligations and not missing payments.

If you are towards the max balance it will effect your utilisation ie have you maxed out your borrowing capacity does this indicate a high risk…

On balance, generally speaking, having access to and using credit, whilst meeting obligations will result in a low risk profile… so would count as good in your case…

If you are applying for more credit, it would be a good idea to have your balance a good way off the max limit however.
Then it’s a case of passing affordability etc….

Clear, no? That’s kind of the point really, companies like to keep their policy as a bit of dark arts to stop them being abused, so, generalities only…

Like others have said, it depends on the credit reference agency and how they implement their “scroing” logic.

As a plus, it does show you can manage debt. On a minus, it does show that you’re only paying the minimum, which might not be a good sign.

It might be wise to start paying a little more to reduce the balance.

I don’t know how true, a colleague was turned down for a mortgage, he was told that despite using a tiny amount of his 50k limit (multiple cards) there was the possibility of destroying his finances and they wouldn’t risk it.

Try moneysavingexpert website for more detailed info…

Recent mortgage broker conversations i’ve had reveal that some of the large resi mortgage lenders count your credit balance as an affordability drag summed @3% of the entire balance every month. £300 for every -£10k. This means, for some (like me), it pays to use 0% credit cards to boost the deposit available in my current account.

Better late than never.

It can impact your ability to gain credit. Your credit rating is only one factor in a lending decision which will be helped as a result of demonstrating regular and uninterrupted payment history. The total level of secured and unsecured debt is a more significant factor given a change of circumstances may result in you being unable to service your debt.

If you’re planning for a mortgage I’d suggest clearing the full balance monthly on CC as it’s a win win decision wise. Cut back on discretionary spending for at least 6 months prior to applying.