Credit Report and paying off credit cards

Samwaydors

Hi

I just wanted some advice really please.
If we reduce the balance on our credit cards, does this improve you credit score and by how much please? Is it a little amount or a huge amount ?

We have one loan and 2 credit cards, all maxed out and are trying to improve our credit score, it is saying we are using 100% of our available credit. What should we be looking at using of our available credit. Thank you

The_Boss

You don't have a credit score, so it won't improve it. Different lenders will score different applications for different financial products differently.

However, generally speaking you are right to believe that this will improve how lenders score your application. Generally, owing less than 50% compared to credit limit is preferable. Get it below 30% and even better. Assume similar for the loan, but generally affordability is also taken into account when you apply for certain financial products based on what you have left to pay.

Tixy

Owing less in total is likely to increase your chance of being accepted for further credit.

Forget about the idea of a credit score, what any potential lender sees is the raw data on your credit file. If your credit file shows you owe £5000 then that is likely to look better than if you owe £10,000.

But how any potential lender would view your credit file overall depends on what else is showing on your file, e.g. if someone had outstanding CCJs and defaults on their file then they are unlikely to be accepted for new mainstream credit regardless of whether they owe £50 or £5000.

In terms of a % of available credit, in general the lower the better. But its not that clear cut as most lenders would rather someone was utilitising 100% of £1000 limits, rather than say 20% of £30,000 worth of credit.

Thrugelmir

Samwaydors wrote: »

all maxed out and are trying to improve our credit score,

With what aim ?

Samwaydors

To try and reduce my debt, and improve my chances of getting a new mortgage in April 2014, as I have just been hit with a default so any chance I have got in improving anything any which way I can is got to be worth a go ... not much hope I know :-(

The_Boss

Samwaydors wrote: »

To try and reduce my debt, and improve my chances of getting a new mortgage in April 2014, as I have just been hit with a default so any chance I have got in improving anything any which way I can is got to be worth a go ... not much hope I know :-(

Ouch. Well repaying as much as possible helps for this obviously as a mortgage application will be scored on affordability. But a recent default won't help at all and could mean instant rejection during the next couple of years.

Are you applying with a partner? Might be worth them applying alone and adding you on later depending on how committed you are and whether you get a legal agreement.

Samwaydors

No independently, the default was for Orange mobile (long story, as these mobile defaults always are) :mad:

Thrugelmir

Samwaydors wrote: »

To try and reduce my debt, and improve my chances of getting a new mortgage in April 2014,(

Then target paying down your unsecured debt first.