Money question?

Question

If I organise a direct debit, taking money from my current account into my savings account will this improve my credit rating? My dad reckons it won't because the money is still mine but surely this proves I am reliable?

I live at home with my parents so don't really pay any bills (I know people are going to have a go at me here but I'm saving practically all my money for a mortgage so am not living it up at the expense of my parents!)

Answer 1

This only proves that you can shift money from one account to another. The way to improve your credit is to prove you can pay your bills ontime, especially your credit bills. Some utilities will report to a credit agency, but for the most part, you are looking at car payments, house payments, loan payments, & credit card payments.

If you want to help build your credit, take out a small loan. Set the money aside, and pay on time every month to pay it back. You'll be paying interest, so it will cost you money to do this, but if you pay on time every single month, then you will improve your credit rating.

If, for some reason, you miss a payment, or start to become late, it can hurt your credit rating.

Credit ratings are a way of telling how well a person full fills promises, in this case, monetary promises. When you take a loan, accept a credit card, etc, you are signing a contract that is a promise to repay all debt incurred involving said card or loan.

When the promise is full filled in a timely manner, and within the guidelines depicted in the contract, your credit rating rises. When you fail to full fill the promise, your credit rating plumets.

Swapping money from one account to another will not do anything at all for your rating. Being reliable is more than showing you know how to shift.

Answer 2

Hello,

Doing that will not improve your credit rating.

To show that you can move money between accounts will not impress financial institutions, the only way to improve your credit rating is to get credit and show you are trustworthy and can repay it, in full, on time.

A Direct Debit is for a variable amount each month (or other billing period). For example: a water bill, as the amount changes depending on how much water you use.

You would want to setup a Standing Order if you wanted to transfer a certain amount to your savings account each month. A Standing Order is for a fixed amount which is transferred each month (or other billing period).

It is advisable for you to have an emergency fund setup in-case an unexpected event occurs, this way it is still a surprise; but you have some money saved up to deal with the problem.

To improve your credit rating you can:
- Write cheques.
- Take out a small personal loan and pay it back on time.
- Take out an overdraft and repay the amount you spend on it each month.
- Take out a credit card and keep the account in good standing.

Thanks

Answer 3

Dear friend, the only time you are reliable when you relying on your own account.Years ago I had a solid savings account.I paid everything with cash.I owed nothing to anybody.I had no debts.
Then I wanted to buy my first house, and what did bank say NO.
Why ? My credit record was 0. Banks force you to go into debt in order to lend you money so that they can milk you for the interest. Your savings account is not your credit rating and banks do not give a hoot about your reliability.
Save then purchase is one way.Or go into debt to establish your "credit rating" at your cost, of course.

Answer 4

Investing money helps you obtain a mortage because your balance sheet will look real good to a lender. If you want to improve your credit rating buy a car or something with a short term loan and pay the loan payments timely. Do the loan even if you have the cash to buy what you want.

Answer 5

It wouldn't, just paying your bills on time will help, also avoid too many credit checks.