How does having a credit card affect credit rating?

andrewr22

I'm looking at helping someone out and opening a new credit card to balance transfer to interest free for 12-15 months and paying the balance off within this time.

I don't currently have any credit card balances, although I have done until a few months ago (only small balances though).

The last few times I've got my credit report/rating from Experian and similar companies they've always come back good. I repay any balances on time and reasonably quickly.

I'll also be looking at getting a mortgage in 6-9 months (this will be my 1st mortgage). How will having a credit card with a balance of say £3k affect my credit rating and ability to maxmise my mortgage possibilities?


Thanks for any advice

YorkshireBoy

andrewr22 wrote: »

I'll also be looking at getting a mortgage in 6-9 months (this will be my 1st mortgage). How will having a credit card with a balance of say £3k affect my credit rating and ability to maxmise my mortgage possibilities?

In my experience (with YBS), they'll subtract 36% (12 months of 3% minimum payments) of the debt, at the time of the search, from your stated income before applying their lending multiples. Available, ie unused, credit is not taken into account.

You must think a lot of the other person to take on £3K of THEIR debt, which will then become YOUR debt.

andrewr22

ok, so say when I apply for a mortgage in 9 months the balance is £3k, they'll dudct £3,000 x 36% = £1,080 from my income, which is say £30k, now becoming £28,920 then apply, say 4x multiple, now giving me a mortgage of £115,680 rather than the £120,000 I'd have had if I didn't have the debt. Is that right, from your experience?

Taking on the debt isn't a problem for me but concerns over the possibility of wanting a mortgage are.

YorkshireBoy

Yes, providing you go with YBS and their criteria doesn't change in the meantime and the recession/credit crunch doesn't deepen! It's a bit of a gamble isn't it?

andrewr22

Definitely a gamble!
Thanks for your help, given me something to think about it.