'Arrangement to Pay', credit ratings and mortgage application

Something_Witty

I'm reposting this from the mortgage board in hope of some responses!

Other half and I are planning on buying our first property in 2015, when we will have a 20% deposit. Looking at houses around the 150-160k price mark with combined salaries of approx. 45k.

Other half has a clean credit history, no debt except a student loan, one credit card paid in full every month and a current account with small overdraft (overdraft is never used). I on the other hand had a few thousand pounds of debt until last year, when I finally managed to clear balances of one loan and a couple of credit cards. Now I only have approx. £700 outstanding on a Barclaycard under an 'arrangement to pay'. No other late payments or defaults. We are linked financially via a joint account with small overdraft (which we hardly use).

I am now in the position to clear this Barclaycard balance completely, and will be debt free, except for a student loan. As I understand it, I have 2 options:

1) Pay the Barclaycard balance, settle and close the account. I understand this will mean the AP markers will stay on my credit file for another 6 years. I would then apply for a sub-prime/basic credit card and pay off in full every month to try to improve credit history.

2) Speak to Barclaycard and request to come out of the arrangement to pay. Barclaycard have advised that I need to make 2 further payments to come out of the arrangement (which I will do anyway), at which point I can request a new card. I would then pay off the balance so the amount owing is zero, then spend a little each month and pay in full every month. I understand that if I keep the account open and active the AP markers will drop off in 3 years rather than 6.

Which option would be most positive for my credit file/rating, and therefore a potential mortgage application in 2015? I have heard that active accounts are weighed more heavily in credit scoring but I don't like the sound of AP markers hanging around for a further 6 years when they could be gone in 3!

Opinions appreciated - thanks

Tixy

Hi

Its a bit hard to judge because some potential lenders may prefer to see 1) and others may prefer to see 2).

However on balance, and if BC have definitely said 2 is an option then I would personally go that route.

I'd also consider applying for a different credit card and use and repay that each month as well, even if you go for 2).

Something_Witty

Thanks Tixy. Barclaycard have said they will take me out of the AP in November but I will have to apply to get another card and small credit limit. I'm hoping they will let me, as the debt will be paid off in full by then.

What would be a good second credit card to apply for? I'm wary of applying for one and getting rejected - not keen for my credit rating to take any more hits!

mytravelrep06

Hi, I was in your situation and phoned barclaycard and cleared the balance. At first they said they would allow me to use the account again and have a new card..

however, a few days later i got a letter to say the account was now closed and that i couldnt apply for a new card.

Just because they say that doesnt mean it will happen.