Shared Ownership Application, Credit Cards and Credit File

B_Real_2

I'm looking at a shared ownership option through BPHA

http://www.keyhomes-east.org.uk/index.asp

They've informed me that I can't view any properties until I fill in an application form which allows them to assess my affordability, and that this credit check would leave a footprint but this should not be detrimental to my credit file.

Can anyone confirm if this is correct?

Additionally, i've got 4 credit cards that are roughly:

CC1 - £1,500 used, £5,000 limit
CC2 - £3,000 used, £12,000 limit
CC3 - £3,000 used, £7,000 limit
CC4 - £2,000 used, £5,000 limit

I've had these balances for years and they've all been tarted and transferred over time. I'm earning £50k pa, so I can cover the costs of repayments easily but I'm not reducing the debt. I have around £10k in savings, but I'm not inclined to use that to pay down the debt so I can use it towards mortgage deposit.

1) Should I reduce the capacity between used and limit prior to any mortgage or shared ownership application? (i.e. get my limits reduced).

2) The rates on the CC's are high (c. 20%) on CC2, CC3 and CC4. I'm planning on taking out a loan (at circa 3.8 to 5%) to get rid of the cards. Should I do this before or after any shared ownership affordability or mortgage application?

Any thoughts, advice or observations welcome.
(Perhaps this thread belongs in another forum section?)

chanz4

One question why are you not reducing the debt on a 50k wage? Also would be looking at where your income is going.

Candyapple

If you're earning £50k, roughly £3k per month after tax, why do you only have £10k in savings?

If you reduce your credit limits, you run the risk of your credit:debt ratio being really high. Currently it stands at 32%. Assuming you reduced your cumulative limits to £16k, it would then be 59%.

If you are applying for a mortgage soon, the last thing you want to be doing is any major changes to your credit file. Applying for a loan to clear the cards would be a definite no-no.

Either way, whatever mortgage offer you receive it will be reduced by the £10k or so debt that you owe.

Would it not be better to use your savings to clear the debt and then reduce down some of the limits, whilst saving in the meantime for a new deposit fund? Surely on your salary this shouldn't take years, but months to be back in the same position you are in now, albeit this time, debt free.

Atif

Taken the plunge and will be checking into the Bankruptcy Court Hotel in the morning. I have the paperwork mostly done, they said that I could leave the bits I am not sure about and they will go over it first with me. There is not a lot as the wonderful lady at debt advice foundation took all the costing details from me over the phone and sent an email with them in for me to print and attach. I have the £525 in cash as they only take cash and I don't have to pay more as I am now 70. (eeeek) Between them and this forum I feel relatively confident, but am dreading tomorrow, feeling terrified in fact.

B_Real_2

I've only been at £50k for a year, and this incurred a relocation to an area that's pretty expensive where my rent is £950pm, plus bills (c. £250pm). I'm looking into alternative options to reduce that, housesharing etc. My car is 12 years old now and that throws up some big bills every now and again that keep setting me back. Currently weighing up costs of repair v costs of getting a new one, but again I'm concerned at the impact a loan for a new car (whether it's 2nd hand or brand new) will have on credit file and mortgage application. The loan I was considering would have been to clear credit cards and contribute to a new car, so around the £15k mark.

I'm a single guy living on my own, so bills, food etc. are never split. I'd say my social habits are about average for someone in my situation, drinks once a week, meal out once a fortnight or once a month. Few dates here & there (which tends to involve paying!). Play a lot of sports which can involve weekends away here and there. So yeah I guess my social habits chew up a good chunk of my disposable monthly income.

Had not considered the credit / debt ratio. So using my savings to pay off the CC's makes even more sense now. I've just always been reluctant to lose the savings stash in case I need it for an emergency some day.

My new job is the first time i've ever had a bonus scheme at work and that's coming up in June (max 10%) so i'll see what the outcome of that is and use that against the CC's as well.

Thanks for the comments so far.

B_Real_2

Can anyone elaborate on the credit / debt ratio and how this compares to your overall credit limit in any mortgage application?

I recall last time I went for a mortgage they mentioned that your total amount of credit is factored in to your affordability calculations. So in my above example

Credit limit £29k
Credit used £9.5k
Ratio 33%

So not a bad ratio, but a high credit limit which will reduce my total affordability calculation, i.e. I could potentially go out & blow £20k the day after my mortgage approval, so they need to factor this in.

Candyapple

B_Real wrote: »

Can anyone elaborate on the credit / debt ratio and how this compares to your overall credit limit in any mortgage application?

I recall last time I went for a mortgage they mentioned that your total amount of credit is factored in to your affordability calculations. So in my above example

Credit limit £29k
Credit used £9.5k
Ratio 33%

So not a bad ratio, but a high credit limit which will reduce my total affordability calculation, i.e. I could potentially go out & blow £20k the day after my mortgage approval, so they need to factor this in.

You've pretty much answered your own question there.