Should I Apply For A Credit Card To Boost Chances Of Mortgage Acceptance for FTB?

flush_the_hamster

So to cut a long story short, in October 2009 I completed my IVA:j. I am getting married next year and currently live at home with ma & pa. Wedding costs are done and we will have a deposit of around £30k for a deposit for property.

As of October this year (accounts will be aged 6 yrs), the accounts which were defaulted will drop from my credit report.

So here is my question.

I have held my current bank account since 2004 & have never gone overdrawn. It also has £1000 overdraft though this has never been used. I also have a contract phone with the same company for 12 years and this has never had a missed payment (Direct Debit). I also have a Next shopping account (didn't realise @ the time of ordering I was getting credit!) and again all of the payments are in full (Direct debit). I buy at least one cheap item of clothing a month on it (underwear, ties etc.) so that it keeps the green dots going. Also been at current address for 10 years.

So will I have a good chance of getting a mortgage with the cleanup of my credit report and the positive status of my current active accounts (the OH's report is squeaky clean). Or should I get one of those Cashplus cards with the credit builder option on it. I'm unsure of when having access to too much credit becomes a bad thing so do I apply for an actual credit card once report is clear in November...Or do nothing and apply for mortgage once all clear...? Planned application for mortgage will be around April/May next year.

I will also be a first time buyer with my wife to be and budget and check my accounts on a daily basis......I'm not going down that road again!!

And I'm hoping that £30k will be seen as a half-decent deposit (looking at around £150-180k house with monthly repayments around £950 - after all our estimated bills we will still have £1.7k (joint) a month available for savings and emergencies etc.)

Any advice would be great.

Experian Credit rating current @ 450, Equifax @ 329

Thrugelmir

Experian Credit rating current @ 450, Equifax @ 329

Saving with a potential lender ( and banking with) may help improve your credit score. Although I read little into consumer published credit ratings, yours is extremely poor currently.

Consider buying a cheaper property. A 2% interest rise on a £180k mortgage is a £300 per month increase. Much better to take small manageable steps up the property ladder than over commit.

You need to demonstrate to a lender that you are reformed and have learnt from your experience.

flush_the_hamster

Thanks for your reply. Yes - It is currently really poor - which is why I wouldn't even bother trying to apply for a mortgage just yet.

I'm still learning on different types of mortgages and was looking at 3/5 year fixed. I also don't know if I'm misunderstanding or didn't explain very well but I was hoping that if a property is 180k then with my deposit I would be applying for a 150k mortgage.. So the 2% interest rise be on the 150k?
And I currently bank with a potential lender :-)

Thrugelmir

On a £150k , a 2% increase would be £3k per annum or £250 per month.

Sounds like you are on the right track. Stay on it. Everyone makes mistakes but they can be rectified.

Don't become paranoid over your credit rating either!

brit1234

Make sure you are registered to vote at your address. I used getting a cheap contract phone to improve my rating as well as broadband. Didn't need a credit card but had a student loan and overdraft a few years ago.

Wh05apk

As brit1234 says ensure you are on the voters roll, if the lender cannot find you, they will assume you are registered elsewhere, and may have other undisclosed issues.

Saving with a lender makes no real difference anymore, in the days when underwriters would manually assess your application it did but not anymore.

Lenders will on the whole either decline an IVA application straight away at the moment or need it to be 12 months at least which yours will be.

The more "credit" you can get to proove that you are credit worthy the better, so if you can get a credit card and use each month it would help (but ensure you pay in full each month - set up a direct debit - miss a payment and you can forget it)

Credit scores are an indication only, all lenders use different criteria, so don't waste your money on them.

Lenders criteria is changing all the time, but currently would recommend Halifax as being most likely to accept you, but at 85% they are all pretty picky.

Another option, do you need your income to get the mortgage, could it be done in just your oh's name? if so that could be done, in which case your history will be irrelevant, there are some lenders who will accept this.

flush_the_hamster

Hi - Thanks for your replies. I can confirm that I am on the voters roll at this address.

TBH I did a mock mortgage application online (without entering personal details), and my current bank account (Nationwide) asks whether "In the last six years have you been declared bankrupt or been subject to an IVA". I'm guessing that anytime after October I can actually say "No"!.

You're right about the credit scores - but I think it was just curiosity that I had to find out. I am keeping my Experian and Equifax accounts active until the defaults and IVA is no longer listed - and will probably continue with one of them after this (no point subscribing to both I'm thinking).

Halifax were unfortunately one of the creditors involved in the IVA so doubt they would touch me with a barge pole!

Yes - we will need both of our incomes. I'm on 34k and OH is @ 21.5k.

Wh05apk

If they ask whether "In the last six years have you been declared bankrupt or been subject to an IVA" then you will still need to declare it, they will find it when they do a credit search, if you don't declare it and they find it, that could just be the reason they need to decline it.

With the IVA, when you say you completed the IVA did you repay the debts in full, or were they written off?

flush_the_hamster

but as of May Next year it will be over six years - so it should no longer appear on my report.

The IVA - I paid of the agreed amount in full - the remainder of the debt was written off.