Too much available credit?

shortcrust

My total available credit is £14,000 and I'm worried this will look bad when I come to apply for a mortgage next year. My salary is £21,500 and the credit consists of:

Overdraft £3,000 - Two accounts, both of which are always in credit.
Credit cards £7,000 - Always paid in full except for 0% deals
Catalogs (woolworths.co.uk and very) £4,000 - Not really used.

Is it a problem at the moment? Would it be wise to close the catalogs? Would the remaining £10,000 be a problem?

Thanks for your thoughts!:)

matttye

Depends on the lender really, but a lot of people suggest you shouldn't have more than 50% of your annual salary in unsecured available credit.

If you don't use the catalogue you might as well close it, unless you can see yourself using it again in the near future.

Fishingtime

Can you not lower your total available credit limit ?

[Deleted User]

If the current account are always in credit then loose the overdrafts. Maybe keep one but reduce it to a couple of hundred pounds - do this on the account from which your utilities direct debits come out of just in case.

If you don't use the catalogue account then close it - catalogues are rarely the cheapest place to buy anything and your credit seems to be in good order. If you have to buy any big ticket items/furnish a new house when you get your mortgage then you can apply for a 0% spending card. This is usually far better than using a catalogue account.

The remaining £7000 credit on your cards shouldn't be a problem.

shortcrust

Thanks guys. Yes, I had been thinking that the catalogs might be useful for 12 months 0% on house stuff, but that won't be for while, and I realise even with the 0% it's usually an expensive way of doing things.

The 50% max sounds sensible so I'll close the catalogs. Will mull Lazyloki's overdraft advice. I like having a buffer for emergencies but the current limits are perhaps a bit excessive considering they're never used.

ValHaller

I think that the 50% of salary rule of thumb relates to the amount you are actually borrowing. For a mortgage application, I would be very surprised if the available credit was actually a problem.

matttye

ValHaller wrote: »

I think that the 50% of salary rule of thumb relates to the amount you are actually borrowing. For a mortgage application, I would be very surprised if the available credit was actually a problem.

Mortgages are viewed differently to unsecured debts.

They're almost necessary!

The_Boss

Just for confirmation, what is your total debt?

CLAPTON

just leave things as they are

what matters is your debts as shown on your credit reports

shortcrust

CLAPTON wrote: »

just leave things as they are

what matters is your debts as shown on your credit reports

The_Boss wrote: »

Just for confirmation, what is your total debt?

Not including the monthly spend which is always paid off, total debt is only around 2000 and all on 0%.

The_Boss

Ok. Because your level of debt will also be of interest to a mortgage underwriter and they may insist that any debt is repaid with proof prior to approving a mortgage. £2k is obviously a lot more manageable to repay than, say £6k.

See, my post was just as useful as CLAPTON's