Please help! Credit rating, excess spare credit, and how to arrange debt!

supersezzie

Hi guys,

I'm about to join the debt-free wannabe page so this is exciting times, but I wondered if you can help!

I'm soon going to be applying for a mortgage and am wondering the best way to 'arrange' my debt to have the best credit score. They are all completely interest free with various deals, including the overdraft luckily! I also have looked on Experian and found that barring a couple of late payments quite a while ago, everything else is in the green, though I have had quite a few switches in my time so I hope that doesn't count too much against me. The dilemma mostly boils down to whether it is good or bad to have lots of spare credit lying around. I'm not sure if lots of spare credit = good because it shows you don't need to use it and can control yourself or = bad because you are dangerously at risk of ending up in debt very quickly! So any help would be much appreciated

Here's what I have going on:


Overdraft:
Opened: 2004 Credit Limit: 1900 Balance: 1200

Card 1:
Opened: 2011 Credit Limit: 6000 Balance: 1000
Card 2:
Opened: 2012 Credit Limit: 2700 Balance: 1150
Card 3:
Opened: 2012 Credit Limit: 4000 Balance: 2250


In addition:
Opened:19/02/2008 Credit Limit: 3600 Balance: 0
This is another credit card I have, with no deal on it. It is the only one I use for spending which I try to pay off quite quickly and is clear at the moment.

So my options are:
1. Keep things as they are and just keep paying it off as much as poss.
2. Ask to lower my credit limits. I think this is a bad option because I suspect the act of actually asking to lower credit suggests you can't control yourself, but I would be doing it purely to try to boost my credit rating as I'm under control now!
3. Try to shift all my debt to Card 1 as it has a big enough limit and close the other two. (Not sure if this will damage my credit rating as it means I will be using almost all available credit or boost it by closing the extra cards).

I'm also not sure what to do about the card I use for spending - it's my longest running card with a perfect payment history so is it best to keep it open, though it's a sitting duck of £3600, which in their eyes I could spend at any moment!

Also, is it always better to clear the credit cards before the overdraft?

Thanks so much for your help, I know that was a long one!! :beer:

YorkshireBoy

I believe, based on my personal experience, mortgage lenders are more concerned with actual debt than potential debt. Plus they'll be protecting their interests via the LTV figure so won't lose out!

Re the overdraft balance, that tells mortgage lenders (and anyone else searching your file) - specifically their automated credit scoring algorithms - that you can't manage your day-to-day living expenses very well, so suggest that you pay that down before applying for a mortgage.

The_Boss

YorkshireBoy wrote: »

I believe, based on my personal experience, mortgage lenders are more concerned with actual debt than potential debt. Plus they'll be protecting their interests via the LTV figure so won't lose out!

Re the overdraft balance, that tells mortgage lenders (and anyone else searching your file) - specifically their automated credit scoring algorithms - that you can't manage your day-to-day living expenses very well, so suggest that you pay that down before applying for a mortgage.

Agreed. The lender could even ask that you repay the debts before offering the mortgage.

Your card balances seem reasonable given the limits but the biggest impact on how you will be scored based on what you have said will be from the late payments.