Owning a credit card help get a better mortgage deal?

stilltheflyest

Hi,

I'm looking to buy a house if its still possible, in the future. I've never had a credit card, should get one regardless. Not had any debt problems, was late to pay a catalogue for £35 once which was put on credit 10 years ago.

Curious to know if it helps get a better mortgage deal? Also since I've never had one, do I need to start with a build/rebuild type credit card?

I'm thinking Aqua as build/rebuild or a good rated credit card like Capital One World.

YorkshireBoy

Some evidence of credit management would help a mortgage lender assess your application better.

The past problems disappeared 4 years ago when the fell off your credit file.

With a £35K income I'd be asking the bank that receives this for a card...not Aqua or the likes.

Before potentially wasting a Capital One application (for their World card) you should read their eligibility criteria. For example, they say they're "more likely" to accept you if you're a home-owner and you've had credit cards in the past. You'd 'fail' on both these points!

stilltheflyest

I'm not really keen on a credit card and definitely not for the credit, will setup dd but I do need to improve my credit rating and would like some cash back if possible.

The HSBC bank credit card offers nothing in terms of cash back. I see your point though, it will probably the easiest way to improve my credit.

Thanks for the advice I'll probably taking that route for a first credit card as long as I can setup payment in full by dd.

Gentoo365

Don't go for the 'poor credit history' cards. If anything they look bad, as do small limit cards.

Assuming you are never going to hold a balance I imagine the best option is to get a normal card from your bank (i.e. the one that receives your salary) and use it for all your regular shopping, repaying in full each month. After a year you may then decide to look for cashback cards now that you have enough of a history to apply to someone else.

The reason a credit card is more likely to help you get a mortgage is that they like to see a history of credit usage (i.e. that you have had access to credit and not messed up).

rb10

Gentoo365 wrote: »

Don't go for the 'poor credit history' cards. If anything they look bad, as do small limit cards.

Any future lender cannot see who your existing cards are with, but only the way that they have been managed. So a 'poor credit history' card is not likely to have any negative impact on a future mortgage application.

(It is possible that holding such a card could cause the CRAs to give you a lower credit score, thus reducing your likelihood of acceptance for a mortgage, but this would require them to hold a list of 'good' providers [to add points to your score] and a list of 'bad' providers [to subtract points from your score]. I think it is highly unlikely that they would do this.)

To the OP - try your own bank first. If they refuse, then go for the likes of Aqua. Set up a DD to pay in full each month, and make sure you always stay within the limit.

Gentoo365

Sorry, but they can see. The detail is sent to experian via the CAIS (Credit Account Information Sharing) file, and is available during a credit seach.

Basically the deal is, if you as a lender become a CAIS member you agree to share all the information about the performance of your accounts. In return when you do a credit search you have access to the information from other lenders.

http://www.experian.co.uk/consumer-information/what-is-cais.html

The following is available:

• The lender, e.g. type of company (bank, retailer)
• The borrower, e.g. full name, full address
• The credit account (as appropriate)
• Type of account (loan, mortgage, etc.)
• Start and closure dates
• Default date - (note, if applicable only)
• Current balance outstanding
• Repayment amount and term
• Credit limit
• History of payment over the last 36 months
• Special circumstances (gone aways, deceased, etc.)
• Date of the last CAIS update.

The tool that is often used by firms that use experian allows each lender to specify their own rules. They can even program them in using a decisioning engine (kind of like a flowchart). This is why the 'credit score' from experian is a guide not the actual score'

The actual rules used are confidential, however there has been statements in the press regarding filtering for specific institutions.

A lot of it is statistical, if it happens that customers who have 'poor credit' type cards tend to default more them the rules may be adjusted to add that as a weighting factor.

That said a small, bad credit type card managed well is better than no card at all, and much better than a payday loan company.

rb10

Gentoo365 wrote: »

Sorry, but they can see. The detail is sent to experian via the CAIS (Credit Account Information Sharing) file, and is available during a credit seach.

http://www.experian.co.uk/consumer-information/what-is-cais.html

The following is available:

You will note that nowhere in the list you give does it give details of the company providing the credit. So if I had a card with Aqua (for example), it would show up on my credit report (to any other lender) exactly the same as a card with a mainstream lender.

As I said in my previous post, the only way it could impact you is by lowering your credit score. However, whilst this is technically possible, I do not believe that it is actually done.

stilltheflyest

Thanks for all the insight, it's actually quite interesting how it all works. I've gone for a card from the bank.

Is it recommended to wait a few months/a year before going for a mortgage?

I suppose I'm wondering how credit improves? When credit limits increase or over time? Monthly, yearly, every spend/lend?

YorkshireBoy

Gentoo365 wrote: »

Sorry, but they can see.

No they can't see (who the lender is). You've proven that by reproducing the Experian text you did! As has been pointed out by rb10 above, the lender type is shown, not the lender name. Proof reading before posting would have highlighted this.

Basically the deal is, if you as a lender become a CAIS member you agree to share all the information about the performance of your accounts. In return when you do a credit search you have access to the information from other lenders.

They do this under the 'principles of reciprocity', ie you get out what you put in.

One of the key factors in these 'principles' is the discouragement of 'poaching', ie if one particular bank is producing good returns with little attached risk then there should not be a mechanism which allowed for another provider to seek out and poach these customers...and that's why the lender's name is not shown.