Paying off debts and credit rating

Twinks

Hello All,

I'm not sure if i'm on the right board here so please point me in the right direction if i'm not.

I have a hypothetical question to ask and would appreciate your feedback/advice on it please.

I currently have a credit card and a loan which have approx. £2,000 on each which i am working to clear asap. I am aiming to clear these within 2 years although hopefully sooner.

If i paid off these in one lump sum using savings and closed the accounts for the loan and credit card, this would leave me with no debts (yay) and no outstanding finance. Does anyone know how long it will be before this impacts upon my credit rating?

I got my credit rating at the end of last year and everything bar one catalogue was good, this one had a couple of amber colours on it which indicates missed/late payments i think. This has since been rectified and all payments are being made and on time but i think this can take something like 6 years to clear from my rating doesn't it?

I am trying to save towards a deposit to get a mortgage and as it stands today (apart from the economic climate) i don't think i would be accepted because of my rating. So if i clear all current finance and don't take out any future credit, how long am i looking at before my credit score improves?

Thanks very much for reading and i hope it makes sense.

Twinks x

CLAPTON

having no debt management on your credit report will adversely affect your credit rating

keep a credit card and use it regularly but pay in full each month; this will show you can manage debt well and so will enhance your rating.

Mortgages have different criteria for lending than other lenders as the debt is secured on the property... affordability and size of deposit are very important here.

In any event if your savings are earning less interest than your debts are costing you, then its best to pay off the debts.

Natan358

When i first contacted experian my score was classed as fair, that was around 8 months ago since then i have taken out credit cards and a loan and been paying everything on time, my score has improved so much these last few months i am now nearly in a good category, and i wasnt on the border before you say it haha

also i remember asking the same question you did twinks about how long it takes, experian takes a few days to get updated information it think, and if you view it monthly online then it shows online updated once a month but the dates every month are exact it can vary so clear whatever you want atleast a month to 6 weeks before you apply i would say.

Twinks

Thank you both Nathan358 and Clapton for replying.

Great tips there about keeping a credit card to prove debt management and also about viewing my credit score monthly.

I think i'll aim to clear as much as i can but keep the cc and use it on small purchases so i can pay it off monthly.

It'll take me a while to save for a deposit before applying for a mortgage but i wanted to clear these and get my rating to the best i possibly could before even thinking about it!

Thanks again for your advice