Credit Card Utilisation - Credit Report

KellyD3

Myself and my husband are thinking about buying our few house and are hoping to get our finances in order prior to doing this. My husband has 2 credit cards one with a balance of £5,500 and the other currently has a balance of £7,000 is he better off paying one in full and leaving the account open with a 0 balance or paying off a set amount from both of the credit cards?

grumbler

I don't think there would be any difference between these two options for the mortgage application.
However, it's best to pay off both or otherwise the one with the highest rate.
Even £5.5K balance can have a serious effect on the application:

TheAnalyst wrote: »

Barclaycard paid in full on the 8th Jan but still shows a balance of £6500 on my Experian credit file.

I'm currently in the middle of a mortgage application and this is causing me no end of issues as they cannot get the "system" to disregard the £6500 even though I can prove it was repaid.

Doctor_Duke

I agree. You need to find a way to reduce your unsecured debt as low as possible. It might be best to try and pay one off completely. It won't matter that the card has a zero balance its the debt that lenders will take into account when considering the mortgage affordability.

KellyD3

The affordability is not an issue we are just concerned about his credit rating he is currently just under fair and we are trying to get this to fair or even good but when I've done research some people say it's better to get the credit card utilisation at 40% for both and others say the amount of open accounts you have can impact your credit rating - very confused!

Superscrooge

Having two credit cards is not going to negatively affect your credit history. But using a high percentage of your available credit will.

I suggest you concentrate on paying off the card that is charging the highest interest.

Doctor_Duke

The affordability issue is not about what you think but the lender who will take this into account when deciding to lend to you. Don't worry about the credit score, that's not an issue, it's outstanding debt they are more interested in. So the advice remains try to get this as low as possible. Having open accounts is not going to be a problem, it's the balance that's on them that is. Hope this helps and good luck.

KellyD3

Thank you for all your help! We have been renting for 5 years now and have had enough of paying off other people's mortgages! We have a 5% deposit and are just hoping that as FTB we are able to find a mortgage company that will lend to us. We are seeing an IFA but the only steer that she has given is that Nationwide would be our best option and given all the information we have to her she says that getting a mortgage with them will be 50/50 - I feel like those odds aren't great!!!!