Best strategy to improve credit rating
April 28, 2013 8:10 PM Subscribe
Through a mixture of screwups and missed opportunities, I'm pretty sure my credit rating is either dismal or nonexistent. What's the best strategy to improve it? (Snowflake details inside.)
I'm a grad student in my early twenties, originally from the UK but now living in the US. Before I moved here (two years ago), I was super-lax and really pretty awful about money, and I imagine this is reflected in my credit rating. I got sent to collections once because I cancelled a payment without bothering to cancel the accompanying service, and I got significantly overdrawn on my bank account twice (and got bailed out by my parents both times). I also never bothered to use the credit card my bank gave me; I imagine that making use of that (and paying it off) would have helped my credit score at least a little.
Now, I'm trying to be better about this stuff, and I'm fairly financially solvent, but I know the above events are probably still affecting my credit rating, so I'd really like to work on fixing that, with your help.
- What's the best way to find out my credit score? Is it the same in the UK and the US, or will they have separate scores for me?
- If I have separate UK/US scores, I'd ideally like to build up my UK credit rather than the US (since I don't really plan on staying here after I finish my degree). Will my history of bad credit in the UK make this difficult?
- If I want to start building up my credit now, what's the smartest way to approach this? I've heard the 'get a credit card and make one small purchase a month, then pay it all off monthly' advice - is this universally good advice? And how can I best do this in the UK while living overseas?
- What kind of credit card would it be best to get? I have a Delta Skymiles account - would it be smart to apply for one of theirs?
I'd also like to state upfront (in case it isn't obvious) that I am really, really clueless about money & credit ratings & all that, and I've made a habit of not ever thinking about this stuff. So, any 'for dummies' style advice would be really helpful. Thanks in advance!
I'm a grad student in my early twenties, originally from the UK but now living in the US. Before I moved here (two years ago), I was super-lax and really pretty awful about money, and I imagine this is reflected in my credit rating. I got sent to collections once because I cancelled a payment without bothering to cancel the accompanying service, and I got significantly overdrawn on my bank account twice (and got bailed out by my parents both times). I also never bothered to use the credit card my bank gave me; I imagine that making use of that (and paying it off) would have helped my credit score at least a little.
Now, I'm trying to be better about this stuff, and I'm fairly financially solvent, but I know the above events are probably still affecting my credit rating, so I'd really like to work on fixing that, with your help.
- What's the best way to find out my credit score? Is it the same in the UK and the US, or will they have separate scores for me?
- If I have separate UK/US scores, I'd ideally like to build up my UK credit rather than the US (since I don't really plan on staying here after I finish my degree). Will my history of bad credit in the UK make this difficult?
- If I want to start building up my credit now, what's the smartest way to approach this? I've heard the 'get a credit card and make one small purchase a month, then pay it all off monthly' advice - is this universally good advice? And how can I best do this in the UK while living overseas?
- What kind of credit card would it be best to get? I have a Delta Skymiles account - would it be smart to apply for one of theirs?
I'd also like to state upfront (in case it isn't obvious) that I am really, really clueless about money & credit ratings & all that, and I've made a habit of not ever thinking about this stuff. So, any 'for dummies' style advice would be really helpful. Thanks in advance!
In the US, you can get a Secured Credit Card which is a credit card backed by a security deposit. The credit limit is equal to the size of the deposit, so the bank can always get their money back if you stop paying bills. Paying the bills helps improve your credit rating. One option if you have some savings or your parents are willing to help with the deposit.
posted by scose at 9:00 PM on April 28, 2013
posted by scose at 9:00 PM on April 28, 2013
Response by poster: Just to clarify, I no longer have any debt - aside from UK student loans, which I don't have to worry about. I'm financially solvent and independent.
Yowser, you state that my UK-based mistakes shouldn't affect my US credit. Does that mean that US and UK credit are totally independent of each other? If that's the case, I'd be much more interested in improving my UK credit score than my US. Any advice from anyone on how to do this would be much appreciated.
posted by littlegreen at 9:10 PM on April 28, 2013
Yowser, you state that my UK-based mistakes shouldn't affect my US credit. Does that mean that US and UK credit are totally independent of each other? If that's the case, I'd be much more interested in improving my UK credit score than my US. Any advice from anyone on how to do this would be much appreciated.
posted by littlegreen at 9:10 PM on April 28, 2013
You can easily check your US credit report if you go to www.annualcreditreport.com. Be careful. This one is the official one to use - there are many other people who will offer you a free copy of your credit report - with strings attached.
posted by metahawk at 10:20 PM on April 28, 2013
posted by metahawk at 10:20 PM on April 28, 2013
In my experience UK and US credit are entirely independent. When I moved to the US I had to establish credit from scratch.
posted by monotreme at 10:29 PM on April 28, 2013
posted by monotreme at 10:29 PM on April 28, 2013
Best answer: As with most things involving the UK and money, start by reading the Money Saving Expert page about credit ratings, then get your £2 statutory report from Experian in the UK. If you're physically located in the US, you may find proving your identity a bit tricky (they want recent paper bank statements, etc.), but once you get it, you will be able to identify what, if any, problems there are on there, and then go through the Money Saving Expert advice to make things look better to banks, etc.
Your UK and US credit histories are completely independent. There is no such thing as a "credit score" in the UK, and the strategies for improving your score in the US will have the opposite effect in the UK (e.g. in the UK, access to a lot of unused credit is not a good thing), so make sure any advice you get is UK-specific, or at least be sure to ignore anything that is US-specific.
posted by caek at 11:41 PM on April 28, 2013
Your UK and US credit histories are completely independent. There is no such thing as a "credit score" in the UK, and the strategies for improving your score in the US will have the opposite effect in the UK (e.g. in the UK, access to a lot of unused credit is not a good thing), so make sure any advice you get is UK-specific, or at least be sure to ignore anything that is US-specific.
posted by caek at 11:41 PM on April 28, 2013
Best answer: If you want to build up a history of responsible UK credit card use while in the U.S. then you want a UK credit card that applies 0% commission/fee on foreign transactions. Again, check Money Saving Expert. At the moment, you want a Halifax Clarity. You may not be able to get this because of your history, but the only way to know is to try, unfortunately.
posted by caek at 11:48 PM on April 28, 2013
posted by caek at 11:48 PM on April 28, 2013
This thread is closed to new comments.
Oh, and a tip, if you legitimately owe money, you should pay it off now. If you wait six years and pay off an old UK debt, it will be "re-aged," rising like a zombie from the grave to reinfect your UK credit ratings. I'm guessing good credit ratings will help you more in your late 20s than in your early 20s.
One of your questions was which card. Being Canadian, I can only speak in generalities. But I can say that you want to find no-fee cards that together report to all credit rating agencies in the US (Equifax and Transunion, Experian if they haven't exited the business in the US like they have here). It doesn't matter what percentage the interest is, because you're only going to use them to make small purchases.
Alternate purchases from one card to the next. Keep track of when you owe money and pay off the full balance, twice a month if you are forgetful (like me), or get them to automatically take the full balance from your chequing account when it's due. Don't even think about using more than 10% of your credit limit.
posted by Yowser at 8:40 PM on April 28, 2013