Paying off in full -> Paying less

raspberryrippl3

Hi there

I usually pay off my c/c in full, every month (and use it only to receive cashback).

I'm in the process of buying a house and money will be a little tighter for a couple of months, so my question is, will my credit score reduce (I know it's a proprietary number/kinda meaningless) if I start using the credit facility and only pay, say half of the full amount? My rating is excellent and I don't want to jeopardise it at all.

Many thanks!

[Deleted User]

If you're carrying a balance, it could potentially impact the amount a lender is willing to advance. Or if your case is borderline, and influenced by other factors, it could affect acceptance.

Where are you in the mortgage process?

JimmyTheWig

It will certainly make your credit file look worse if you have credit card debts.

Doing this before the mortgage comes through (i.e. before you move) could be a disasterous plan - the mortgage company may refuse to lend you the money at the last minute.

Doing it once you have moved is arguable. It shouldn't hit your rating too hard.
If you have a sure-fire plan to pay the debt off then it's not a bad way to borrow.
Obviously you'll get charged interest, so the better thing to do would be to save up before you buy the things you're planning on buying. Is all of it necessary? Is all of it necessary straight away?

Borrowing like this _can_ become a slippery slope. Once you've done it once you may find it easier to do again - and for things that aren't quite essential as what you're planning on buying now.

jamesperrett

Can't give you a definitive answer (can anybody?) but I've had outstanding credit card balances during my last two house purchases. The mortgage companies have muttered something about paying off the balance but the mortgages have gone through with no problems. It would probably be helpful if you are paying off more than the minimum payment each month.

MEM62

raspberryrippl3 wrote: »

I know it's a proprietary number/kinda meaningless
My rating is excellent and I don't want to jeopardise it at all.

The two statements don't add up. If you understand that your score is meaningless, which it is, then why are you concerned jeopardising it?

Paying off a balance over a couple of months will have no impact on your credit standing.

grumbler

MEM62 wrote: »

Paying off a balance over a couple of months will have no impact on your credit standing.

I agree. Some lenders can even like this. MSE in their article even say (arguably) that paying balance in full consistently can have a negative effect.

Deleted_User wrote: »

If you're carrying a balance, it could potentially impact the amount a lender is willing to advance.

JimmyTheWig wrote: »

It will certainly make your credit file look worse if you have credit card debts.

Only if the balance is really big in terms of the income or available credit. AFAIK, lenders can see minimum payments only and can't see full/partial payments. AFAIK, normally, even if a card is paid in full, the balance isn't reported as £0 as reporting and billing cycles differ.

redpete

MEM62 wrote: »

The two statements don't add up. If you understand that your score is meaningless, which it is, then why are you concerned jeopardising it?

Because something that might reduce someone's reported credit score from a CRA might also affect their credit rating by a potential mortgage lender. The oft-repeated mantra that credit scores are meaningless is not correct - they can give an indication of how a lender might assess your situation.

redux

MEM62 wrote: »

The two statements don't add up. If you understand that your score is meaningless, which it is, then why are you concerned jeopardising it?

Paying off a balance over a couple of months will have no impact on your credit standing.

grumbler wrote: »

I agree. Some lenders can even like this. MSE in their article even say (arguably) that paying balance in full consistently can have a negative effect.

I would assume that remark is more about the viewpoint of a credit card company than a mortgage.

After all, if someone absolutely always pays the credit card in full it's harder for the firm to earn money from their custom. This probaly isn't relevant to a mortgage.

JimmyTheWig

grumbler wrote: »

AFAIK, lenders can see minimum payments only and can't see full/partial payments. AFAIK, normally, even if a card is paid in full, the balance isn't reported as £0 as reporting and billing cycles differ.

Correct that they never see a £0 balance. If yuo use your card regularly you never have a £0 balance.
But they do see Statement Balance and Payment Amount. If these two tie up then it is paid off in full.

Also, over the long term, they will see the trend of the balance. If it's going up that suggests a problem.

MEM62

redpete wrote: »

Because something that might reduce someone's reported credit score from a CRA might also affect their credit rating by a potential mortgage lender. The oft-repeated mantra that credit scores are meaningless is not correct - they can give an indication of how a lender might assess your situation.

I doubt that. Firstly, the lender does not see the 'score' they only see the raw data and use that to make a judgement based on their own lending criteria. I agree that the data is important and it should be ensured that this is correct and up to date. But - it is only the data that is important.

Secondly, these scores are not based on anything and they fluctuate without rhyme or reason. I'll hold up my own score as an example, which is 'poor'. I have lived at the same address for 27 years and have been on the electoral roll for all that time. I have no loans or debt other than a mortgage. All my accounts are up to date and any CC balances are cleared each month. There is absolutely no adverse data on my report at all that would justify this rating. As I said, meaningless.

grumbler

redux wrote: »

I would assume that remark is more about the viewpoint of a credit card company than a mortgage.

After all, if someone absolutely always pays the credit card in full it's harder for the firm to earn money from their custom. This probaly isn't relevant to a mortgage.

I agree, but as the OP is "in the process of buying a house" I assumed that the mortgage was already approved in principle, so higher balance(s) within the existing credit limits could do no harm.