Mortgage preparation strategy

matttye

Hi

I'll be looking to get a mortgage in about 1.5-2 years. Saving every spare penny for a deposit ATM.

At the moment I have:

3x current accounts, no overdrafts, always in credit.
2x bad credit credit cards (limits are £250 and £500 respectively), paid in full each month.
A phone contract.

The two credit cards and one of the current accounts were opened in the last 6 months.

I have two defaults that will have gone by the time I apply for a mortgage (drop off in Feb and March 2015); will just have an arrangement to pay left, but that will be about to drop off by then too (markers will drop off Feb to June 2015).

My plan is to: -

1. Not apply for any more credit;
2. Accept any credit increases I'm offered;
3. Reduce credit limits a few months before mortgage application if they've become high.
4. Save a 15-20% deposit. I may be able to save more than this (~30%) when I'm qualified for my new job.

Can anyone see any problems with this? Would be grateful for any comments and suggestions.

Thanks

izools

Seems like a perfect strategy. Some minor alterations:

Having just one bank account will be much easier to explain away to a mortgage underwriter and put them off less.

Keeping your credit card balances under half of their respective limits, too.

Probably no need to worry about reducing credit card limits unless they get very very silly which I doubt they will within the timeframe you're looking at.

Also avoid switching employer or moving to other rented accommodation in the mean time too if at all possible - it's not just about your credit file, but how stable you are too

Good luck!

matttye

izools wrote: »

Seems like a perfect strategy. Some minor alterations:

Having just one bank account will be much easier to explain away to a mortgage underwriter and put them off less.

Keeping your credit card balances under half of their respective limits, too.

Probably no need to worry about reducing credit card limits unless they get very very silly which I doubt they will within the timeframe you're looking at.

Also avoid switching employer or moving to other rented accommodation in the mean time too if at all possible - it's not just about your credit file, but how stable you are too

Good luck!

One of my accounts I closed back in March but a phantom balance has appeared on it and its been reopened for some reason. More about that in this thread. I was thinking of keeping it open until the AP markers drop off but might just close it again if its going to cause problems.

I use a second current account for my emergency fund so don't think there'll be any problems there. Don't like to keep all my money in one place!

I'm training for a new job with my current employer so that won't be an issue either.

Thanks for your sound advice

ChopperST

I have multiple current accounts to take advantage of various offers, cashback etc. and its never been a problem come mortgage application time. Provided they are run in credit and they dont have huge overdraft limits on them giving you a high available credit I wouldn't worry.

If you use them, keep them, if you don't, then close...

ValHaller

matttye wrote: »

At the moment I have:

3x current accounts, no overdrafts, always in credit.
2x bad credit credit cards (limits are £250 and £500 respectively), paid in full each month.
A phone contract.


My plan is to: -

1. Not apply for any more credit;
2. Accept any credit increases I'm offered;
3. Reduce credit limits a few months before mortgage application if they've become high.
4. Save a 15-20% deposit. I may be able to save more than this (~30%) when I'm qualified for my new job.

Can anyone see any problems with this? Would be grateful for any comments and suggestions.

• 3 current accounts seems a trifle excessive, although if they are all in good order, I don't see a problem.
• Given that some lenders reject on any hint of a payday loan, in your position, I would only keep the bad credit cards for as long as it takes to get a general market card.
• As for credit limits, I suggest to only accept increases up to a limit which you are happy with. It looks better on the record to have a limit raised from £5000 to £6000 and straight back down to £5000 than it does to have a limit of £8000 for a year and back down to £5000 just 3 months before you apply.

matttye

ValHaller wrote: »

• 3 current accounts seems a trifle excessive, although if they are all in good order, I don't see a problem.
• Given that some lenders reject on any hint of a payday loan, in your position, I would only keep the bad credit cards for as long as it takes to get a general market card.
• As for credit limits, I suggest to only accept increases up to a limit which you are happy with. It looks better on the record to have a limit raised from £5000 to £6000 and straight back down to £5000 than it does to have a limit of £8000 for a year and back down to £5000 just 3 months before you apply.

1 - I may re-close the one that's just been re-opened, as I have no use for it.

2 - I know that lenders can't see the names of the lenders on our credit reports, but can they see the APRs? If not, then they won't know whether it's a sub-prime card or not anyway will they? I'm not sure what they will frown more on, more credit applications or simply keeping 'bad' cards!

3 - True. I don't spend a lot of money so there's not really any point in letting the limits go much above, say, £1k each anyway.

Thanks!

kelp7

matttye wrote: »

2 - I know that lenders can't see the names of the lenders on our credit reports

Really? Then whose name gets put next to the credit agreement on the credit report?

Tixy

kelp7 wrote: »

Really? Then whose name gets put next to the credit agreement on the credit report?

Creditors / potential lenders see an anonymised list of your existing and closed credit accounts when looking at your credit file.