Improving Credit File for Mortgage

shell88

Hi All,

I’m hoping someone can offer me some advice/insight. My partner and I are both moving back to our respective parents house out of our rented apartment in order to save money for a deposit for our own home. My partner has/has never had any debt problems so he will be concentrating on saving money for the deposit. However I have had various money problems over the years. Currently I have a £3000 overdraft which I am rarely out of, 2 credit cards – one with a balance of £450 and one of £500, a Littlewoods account with a limit of £2500 (only about £800 is used on this) and a loan with an outstanding balance of £6700. My plan is to throw as much money as possible over the next year towards these outstanding debts and then apply for a joint mortgage after at least year. What I was wondering is which of my debts should I am to clear the most to give us the best chance of getting a mortgage?

Many thanks!

solentsusie

shell88 wrote: »

Hi All,

I’m hoping someone can offer me some advice/insight. My partner and I are both moving back to our respective parents house out of our rented apartment in order to save money for a deposit for our own home. My partner has/has never had any debt problems so he will be concentrating on saving money for the deposit. However I have had various money problems over the years. Currently I have a £3000 overdraft which I am rarely out of, 2 credit cards – one with a balance of £450 and one of £500, a Littlewoods account with a limit of £2500 (only about £800 is used on this) and a loan with an outstanding balance of £6700. My plan is to throw as much money as possible over the next year towards these outstanding debts and then apply for a joint mortgage after at least year. What I was wondering is which of my debts should I am to clear the most to give us the best chance of getting a mortgage?

Many thanks!

Personally I would start with the one with the highest interest rate.

Do you have any CCJ's or defaults on your credit file? Have you checked all of your files with the respective agencies as any detrimental information on these will have a big impact on whether you will be able to obtain a mortgage even when you have paid your debts off.

Good luck!

shell88

Thanks for the advice - I will look into that. I have 1 default from about 5 years ago so will hopefully drop off by the time I apply

solentsusie

Definitely wait and apply after the default has disappeared. You will be offered better mortgage rates with a clean file. Also make sure you never miss any monthly payments on your current debts. Even paying the minimum is better than not paying anything. Set up direct debts to pay the minimum on all your accounts. Better to be safe than sorry!

In the meantime pay off as much debt as you can, highest interest rates first as that is just sensible. Outstanding loans, credit card debts etc. are taken into consideration when mortgage offer amounts are made so having as little debt as possible around the time you apply is definitely a wise move.

Thrugelmir

You certainly need to break the overdraft habit and get your bank account back into the black for a sustained period. Not just a question of clearing debt then applying for a mortgage. Lenders will want to see that the change of habit is permanent.








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solentsusie

Thrugelmir wrote: »

You certainly need to break the overdraft habit and get your bank account back into the black for a sustained period. Not just a question of clearing debt then applying for a mortgage. Lenders will want to see that the change of habit is permanent.
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Definitely agree with Thrugelmir here. You say your overdraft is £3000 and you are 'rarely out of it'. Is that the actual level of your current overdraft? Does your salary pay your overdraft off each month or are you constantly overdrawn? If not then you really need to concentrate on reducing this ASAP.

Good luck.

JKSandy

Depending on highest interest but I would pay off the credit cards first as they are low amounts followed by Littlewoods.

I would then tackle the overdraft and get it to zero and don't use it again.

Then your loan, I think you can make extra payments to loans now, so maybe just pay extra when you can.

Your aim should be to be carrying no debt for when your applying for a mortgage.