Credit Score Improvement (Credit Cards)

richestorags_2

Hello,

A quick question if I may, hopefully it doesn't sound like too stupid a question either!

I have two credit cards, one with a balance of around £800 and one with a balance of around £4,000. For the last 3 years I have been paying them off (from a lot higher), haven't used them at all, and I have no cards left to use. For the last 4 years I have not missed a payment or been late, however, between 4 and 6 years ago I had issues with work and as a result had a steady stream of late payments (all 1's and a few 2's on Experian).

My dilemma is this......I have funds available to pay them off, and am looking at some point in the next 2 years to obtain a mortgage. Do I a) pay them off and close them, even though when looking at my settled accounts on Experian, it will still show the late payments from 4 - 6 years ago? OR b) continue making payments to stretch it out for the next 2 years to gradually bring the balance down to zero but then no late markers will show.

Obviously from an interest perspective it would be wise to clear them, but my priority is making sure my credit file is clean for when I apply for a mortgage, and paying them off doesn't do that (I have settled accounts with Experian that show the payment history of several years before it). I just want to know in someone's opinion which would be more in my favour in 2 years time........

I cannot bring the balances down to zero AND spend on the cards (clearing it each month) as I know for a fact one of the lenders won't even allow me to spend on it at all after the past history (I think they want rid!).

Hopefully that all makes sense. Thanks in advance.

DCFC79

richestorags wrote: »

Hello,

A quick question if I may, hopefully it doesn't sound like too stupid a question either!

I have two credit cards, one with a balance of around £800 and one with a balance of around £4,000. For the last 3 years I have been paying them off (from a lot higher), haven't used them at all, and I have no cards left to use. For the last 4 years I have not missed a payment or been late, however, between 4 and 6 years ago I had issues with work and as a result had a steady stream of late payments (all 1's and a few 2's on Experian).

My dilemma is this......I have funds available to pay them off, and am looking at some point in the next 2 years to obtain a mortgage. Do I a) pay them off and close them, even though when looking at my settled accounts on Experian, it will still show the late payments from 4 - 6 years ago? OR b) continue making payments to stretch it out for the next 2 years to gradually bring the balance down to zero but then no late markers will show.

Obviously from an interest perspective it would be wise to clear them, but my priority is making sure my credit file is clean for when I apply for a mortgage, and paying them off doesn't do that (I have settled accounts with Experian that show the payment history of several years before it). I just want to know in someone's opinion which would be more in my favour in 2 years time........

I cannot bring the balances down to zero AND spend on the cards (clearing it each month) as I know for a fact one of the lenders won't even allow me to spend on it at all after the past history (I think they want rid!).

Hopefully that all makes sense. Thanks in advance.

When were the late payments a sin 2 years time they may have dropped off.

Your not improving your credit score but your credit history.

richestorags_2

Hi, yes you are correct I mean to improve my credit history rather than score.

In 2 years time they will have dropped off providing the accounts are still live. My fear is if I pay them off now, lenders can still see settled accounts and the history prior to that for longer than a total of 6 years.

An example being I have a settled loan that was settled in 2010, but Experian still shows the 3 years payment history prior to it being settled. Therefore this is 8 years history on a settled account! I don't want the same to happen for these cards as it could affect me in 2 years time.

Thrugelmir

Why do want to pay more interest than is necessary?

richestorags_2

Because I'll happily pay extra interest in the next two years knowing that my file is totally clean. The interest payments are less of a priority than having issues applying for a mortgage in 2 years.

Thrugelmir

richestorags wrote: »

Because I'll happily pay extra interest in the next two years knowing that my file is totally clean. The interest payments are less of a priority than having issues applying for a mortgage in 2 years.

Whether you repay the debt now or over the next 2 years is going to make zero difference to how the lender scores your mortgage application.

richestorags_2

That's an interesting comment. But surely lenders will see adverse information and it could have a negative effect? No?

Thrugelmir

richestorags wrote: »

That's an interesting comment. But surely lenders will see adverse information and it could have a negative effect? No?

What's the better of the two choices debt owing or no debt owed.

richestorags_2

The debt won't be owed anyway in 2 years. If I pay it off now, I'll show as 4 years perfect history and 2 years of failing to pay on time (as it will show in my settled accounts). If I pay it over the next 2 years I'll show 6 years perfect history.

The former concerns me, that's my only thinking hence the question.

LplateSaver

richestorags wrote: »

That's an interesting comment. But surely lenders will see adverse information and it could have a negative effect? No?

Can't you do both? Pay off debt and leave card open so the bad history gets knocked off?

If I were you I'd pay off the debt, wait a statement for interest free period to start again, and then start spending a manageable x amount on the card and paying it off in full each month to get extra brownie points with the mortgage lender.

Thrugelmir

richestorags wrote: »

The debt won't be owed anyway in 2 years. If I pay it off now, I'll show as 4 years perfect history and 2 years of failing to pay on time (as it will show in my settled accounts). If I pay it over the next 2 years I'll show 6 years perfect history.

In 2 years time. Your old payment history won't be visible to a lender so it's irrelevant. All a lender will see is that you've taken x years to repay a debt. A more negative factor than owing no debt. Paying on time is a base requirement and the least that's expected.