What looks best on credit file?

Sugar

Between my husband and myself we have 2 car loans, a credit card with a £1600 balance (£5000 limit) another credit card which has an available of £6000 but no balance as we do not use it. The only other credit apart from our mortgage is his phone on O2 refresh which has just started and the phone plan stands at £690 outstanding and comes off with phone bill at £30 a month. The balance on the credit card is interest free for over a year and a half still and is paid at £50 a month but we are going to increase this to £100. We have savings which we could use to pay the smaller car loan off or use it to pay off the credit card and the phone plan so we have less forms of credit.

What looks better? Any suggestions? We are looking to move house in a year or so and really want our credit files to look their best. We have never missed a payment on anything so they are fine that way.
Thanks in advance

[Deleted User]

Pay off the highest rate debt first.

Sugar

I'm not looking for ways to save money though. Do credit card balances not look worse on your file than a car loan?

pheonix254

debt on a credit file looks like debt, no matter what it is tied to, unless it's a payday loan in which case it looks like you're about to default.

Settled debt is the best thing to have on a credit file. - It proves you can fufil your obligation to lenders. Though once it is settled it doesn't stay on forever (but a couple of years I think)

A credit card will only be "settled" when you close it (so consider that for your £6k card), and if on the other one you've got it interest free for a year, then paying it off when you have interest attracting car loans is a waste of money (obviously keep paying the minimum payment on the card each month)

In your position, I'd pay off one of the car loans rather than the cc.

pheonix254

It's also worth mentioning that closing down all lines of credit isn't necessarily the best thing to do. What you have to bear in mind is that lenders want to see different things -
1) can you handle debt? (i.e. have a few lines available, no red flags on any of them)
2) do you leave other lenders high and dry? (no defaults)
3) are you responsible (is the debt manageable on your salary; are you going to wonga every month; or have you ever settled debts you've had in the past)

Now often they don't have all the information (your salary for instance) unless you provide that to them in another way, as they can't get it from your credit file.

But guessing which lenders want which criteria is just that - guessing. It's like the scores of 5/5, 999, 99 - they're also just guesses of how credit worthy you are - and meaningless unless you're the actual lender.

lee111s

May I ask why you're on a money saving website if you're not looking to save money?

Pay off the debt with the highest interest, but ultimately, debt it debt as mentioned above.

Sugar

Sorry, yes we do want to save money but I just meant that wasn't the question.
Thanks for all your replies, very helpful!

Sugar

One more quick question, what would the affect on my credit file be if I took out a personal loan to pay off one of the car loans over a longer period. That would show a settled loan? It could half the payment if I took it over 5 years. Give us more money to save for a bigger deposit while the payment wouldn't be so high that we couldn't have that and get a mortgage?
Any opinions on this? Just trying to look at different options to save but to reduce credit too.