How will my credit file affect my mortgage options?

supersaverkerry

Can anyone give me some advice please.


I have around £19,000 available to me on credit cards and overdrafts ( 2 overdrafts with same bank and 6 cards)


I currently use about £11,000 of this and over the past 6 months have met all the min payments plus made extra payments each month depending on what I have spare.


I am currently a student and also work part time as well as part time self-employed so am trying to use any extra income to pay off my debts, lately this has been around £350 extra per month.


In just over a year I will finish uni and go into a job which generally has starting wage of £21500 plus my partner is on £27500 so we are hoping that together we can apply for a mortgage. obviously we need to save a deposit and pay off these debts first.


What I am wondering is whether having that amount of credit available will go against me for a mortgage application even though the debt I have is clearing quickly?


I am scared to get rid of my cards having been in dire financial situations with not a penny to my name before and really needing the cards hence the build up in credit.


So I am concerned that when I get credit checked they will say I can not have a mortgage, is this something I should be worried about?

leighlaz

From my experiance having credit cards is a good thing as it shows you borrow money and pay it off where required. If you miss payment then you will start to have issues. If you have large amounts still on the cards it would be best to try and pay them off before applying for a mortgage or at least explain how you intend to pay them off as it all boils down to affordability.

Bare in mind i'm certainly no expert but the best bet is to try and save as much as you can for a deposit.

Good Luck!

National_Debtline

If these things are being paid on time then that should be positive to your credit file. When you apply for a mortgage you will normally be credit checked and asked about your monthly spending habits, including what other credit commitments you have.


So, if you still have some of these debts when you apply for a mortgage the minimum payments will be deducted from your affordability each month. The less the debts are, the less the minimum payments will be and therefore, the less that should impact on your mortgage application. I hope that helps.


Laura
@natdebtline

smdabs

Having assessed mortgage applications, the affordability calculators also take into consideration the potential debt you have (and it is also on Martin Lewis website - check his mortgage guides).

Since becoming strictly regulated, banks have to take in to consideration the potential outgoings a customer COULD have, not just what they have at the time of application. This includes assessing your affordability for if the interest rates were to sky rocket again.

If a bank sees that you have a stupidly high amount AVAILABLE to spend and credit available to you, this will NOT go in your favour as it means they have to consider whether you could pay these balances as well as the mortgage off all at the same time.

By all means, keep the cards, but try your upmost to reduce the credit limits.

It goes in your favour that you can pay back in time and your credit rating is good, but this is only part of the picture they look at. They need to make sure you can pay your mortgage in the WORST case scenario.




(On a side note, reducing your credit limits can also mean reducing the possibility to get yourself in to unmanageable debt - which is always nice!)

supersaverkerry

Thank you for the replies.


So if I get them all paid off and then maybe get rid of some before I apply for a mortgage perhaps that would help?


I have 2 with high street banks and 4 with poor credit places like aqua, capital one and vanquish so maybe they will be the ones to boot! Between the 2 high street that would still leave me with around £7000 available.


I will have to wean myself away from them as even though I am not spending on them anymore I feel like they are my safety net!

smdabs

Definitely get rid of Vanquis and Aqua - just the names can have some sway in the decisions at times when it's on the brink of a credit score as to a Yes or a No-Go for affordability as they suggest that at one point or another, you weren't doing so well/high street lenders didnt want to lend to you.

Don't get me wrong - its extremely unlikely to make a massive difference however when it comes to mortgage applications, always err on the side of caution just in case.

Depending on your income, keeping the £7000 may well be absolutely fine - especially if it's not being used however for your own sake -just how much do you think you'd need in a case of an emergency? £7000 is quite a big emergency limit!!