Improve Credit Score rapidly in 12 months

cfcboy

Hi all, im just about to pay off all mine and the wifes debts (£20k), ive never missed any payments but my credit rating is poor, probably due to the amount of maxed cards i have.

Im currently renting a property and i have £30k of savings tucked away (sale of house) which im adding to too get to around £40k to use as a deposit in 12 months time once my rent contract is up.

Someone was telling me it can take 6 years for my credit report to heal itself which is worrying, im looking to get it to good for when i look to buy and to get a decent mortgage. Is there anyway i can get this to a good rating in 12 months?

Should i keep all my cards open or close them and cut all cards up? Should i use a couple of the lower interest ones and just pay them off in full every month?

Never been debt free but not sure if being 100% debt free is going to cause a slight damage to my credit rating.

Any advice would be apprreciated

The_Boss

You don't have a credit rating; what has lead you to believe you have a poor rating?

What are your credit card limits, balances, who are they with what and what is your salary? We'll be able to better advise you when we know this (although I assume the balances are around the limits from what you've said about being maxed out).

cfcboy

Hi Boss, what you mean I dont have a credit rating? Its poor on both Experian and Equifax... not sure what you mean.

My balances are so:

Barclays CC - £9k, owe £8500
Capital One CC - £1k, maxed
HSBC Loan - £5k
M&S Loan - £5k

I earn £30k pa

DCFC79

Its just a representation of how your file looks at Experian, Equifax etc, lenders dont see the rating/numbers. It will take how ever long it does to rebuild it. If it takes 14 months than that how long it will take.

The_Boss

cfcboy wrote: »

Hi Boss, what you mean I dont have a credit rating? Its poor on both Experian and Equifax... not sure what you mean.

My balances are so:

Barclays CC - £9k, owe £8500
Capital One CC - £1k, maxed
HSBC Loan - £5k
M&S Loan - £5k

I earn £30k pa

You don't have a credit rating - those Experian and Equifax ratings do not mean anything as different lenders will score your applications differently for different products.

That said, lenders will not see maxed out cards in a good light, especially mortgage lenders where affordability is a big issue. Some may only grant a mortgage on condition you pay off your credit cards or loans first as happened with me. Others may accept smaller balances, but not give the best mortgage rate.

I know it's good to have savings for the deposit, but it would be best to pay off at least half of the Barclays and Capital One cards now (or in full if they are not on 0% rates) and also pay some of the loans off. Once you have cleared the cards then keep them, use them for everyday spending and then repay in full.

itsdagal

Once you've paid them off you should have no problems really with no late payments etc. Maybe close one of the higher accounts so you don't have too much credit available.

The_Boss

itsdagal wrote: »

Once you've paid them off you should have no problems really with no late payments etc. Maybe close one of the higher accounts so you don't have too much credit available.

£10k available from a salary of £30k is pretty reasonable though to be honest. I'd possibly want it balanced up a bit, i.e. get a raise on one to around £3k and reduce the other to £5k.

JKSandy

Your debt owed to available credit is probably your biggest issue, I would get this to below 30% of your available credit limit.

Your loans you may want to pay off as well. A lot of mortgage lenders now want your debt paid off as mentioned by The Boss also.

itsdagal

The_Boss wrote: »

£10k available from a salary of £30k is pretty reasonable though to be honest. I'd possibly want it balanced up a bit, i.e. get a raise on one to around £3k and reduce the other to £5k.

I agree - I didn't notice that two were loans and as such would no longer be credit facilities