Have I done the wrong thing...

naturalbornwinner

Last year, I had 2 credit cards, 2 overdrafts and 2 loans.

I now (as of 3 or 4 weeks ago...) only have one loan. I've basically compiled everything together, after treading water for so long...

March 2015
MBNA - £4800
Barclaycard - £6600
Zopa - £13500
TSB O/draft - £800
Santander O/draft - £1200

In short, I want to be buying a property this year. I never missed a payment even with all of the debts listed above. However, it was not ideal (obviously).

I now only have one credit card, which is Barclays and a I have a loan with First Direct.

March 2016
First Direct - £17,500
Barclaycard - £3,000

Obviously, the amount of accounts has now decreased. In my mind, this is a good thing? The loan amount is clearly more now, than the zopa loan last year. I have spoken with a mortgage advisor who was interested in payments per month, and how many months were left on the loan. They did ask if I'd had any bad credit in the last couple of years.

My question is, have I done the right thing, paying off what I can and getting a new loan to reduce the amount of accounts I've got, and... what is classed as bad credit? My rating now is excellent although I'm not sure if this has taken into consideration my last application for a loan. Also, may be worth noting that my Barclaycard limit is going to be increased to over £10k at the end of this month...

If I've missed any key info out, please let me know.

Regards,
naturalbornwinner

scottishbrummy

Speaking from my own experience the key thing is to make sure that your spending is now under control. I got a loan to pay off my overdraft and credit card, but because I didn't actually address the real issue - my spending - I ended up maxing out the overdraft and credit card, meanwhile still having the loan to pay off. If you're spending is more than your income you'll need to address this.
If you're ok with this though then this IS a positive step.

Debtslayer

naturalbornwinner wrote: »

Last year, I had 2 credit cards, 2 overdrafts and 2 loans.

I now (as of 3 or 4 weeks ago...) only have one loan. I've basically compiled everything together, after treading water for so long...

March 2015
MBNA - £4800
Barclaycard - £6600
Zopa - £13500
TSB O/draft - £800
Santander O/draft - £1200

In short, I want to be buying a property this year. I never missed a payment even with all of the debts listed above. However, it was not ideal (obviously). - Do you have any money for deposit, buying fees etc?

I now only have one credit card, which is Barclays and a I have a loan with First Direct.

March 2016
First Direct - £17,500
Barclaycard - £3,000

Obviously, the amount of accounts has now decreased. In my mind, this is a good thing? The loan amount is clearly more now, than the zopa loan last year. I have spoken with a mortgage advisor who was interested in payments per month, and how many months were left on the loan. They did ask if I'd had any bad credit in the last couple of years.

My question is, have I done the right thing, paying off what I can and getting a new loan to reduce the amount of accounts I've got, and... what is classed as bad credit? My rating now is excellent although I'm not sure if this has taken into consideration my last application for a loan. Also, may be worth noting that my Barclaycard limit is going to be increased to over £10k at the end of this month...
You need to refuse the increase in limit, otherwise you could get tempted into racking up the debt on this again; especially if you haven't addressed any of your reasons for over spending
If I've missed any key info out, please let me know.

Regards,
naturalbornwinner

Hi
I've made some comments above. Personally I would try to clear the debts before applying and taking on the financial responsibility of a mortgage

sourcrates

Op what is your income ?

If I were you, I'd decline the limit increase on the Barclaycard.

The fact you have had to consolodate your existing debt rings alarm bells with me, and should with you also !!

Your already 20k in debt, a mortgage application on top of this, may look to potential lenders as over stretching yourself, having said that, it would depend on how much disposable income you have.

Sanctioned_Parts_List

Yes, do refuse the Barclaycard limit increase.

You can simulate the mortgage stress tests yourself:
i) Go here: http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator
ii) Put in all the details for your desired house and mortgage - deposit, interest rate etc.
iii) Now add another 5% to the interest rate
iv) Can you still afford the repayment? If so, apply at will. If not...

Bouncybubbles

Daft as it sounds have you shut all the OD accounts and CC accounts? As mortgage lenders sometimes don't always only look at the actual debt you have but also potential debt you could accumulate. So if these accounts are still open despite being paid in full you still have the ability to spend X amount and rack that debt up again. Again I am just speculating I might be wrong. I personally am not a fan of consolidation loans after being declined for many (good job really) I finally addressed my debt issues and ended up on a DMP. however everyone's circumstances are different. I am sure someone will be able to advise you better than me :beer: good luck!

MEM62

If you have debts where is your deposit?


If you have a deposit saved then I would clear the debt and start saving to replenish the deposit fund.

yasmin2

Am not a fan of getting out a loan to pay off credit cards as it just makes your debt easier to handle but not sure if it actually looks at why you are overspending/getting yourself into huge debt. I took out a loan to pay off credit cards and then just ran up some more credit card debt.

Also hold off getting the mortgage until you paid off a good chunk of that debt.

Post up a SOA so people can advise you how to cut down your spending.

Good luck!!

Happytogetdebtfree

Having recently gone for a mortgage offer I can tell you that they base your offer on your available income, we were also advised not to take out any new credit 6-9 months before applying for a full mortage. As you can see from my signature we had a large amount of debt we have chipped away and avoided any marks against our credit file and it seems to have worked in our favour.
Like anything financially related don't commit to something you can't pay because 30 years is a long time. I questioned the mortage advisor about paying debts quickly and he said all that would do is increase available income and increase the potential mortage available. Plan to save a deposit 5-10% (we were offered deals with 5%) deposit and get spending in order

Hope that helps

Happytogetdebtfree

Nb clearing debt is important but for me majority of mine is 0% or low interest loan so I'm focusing on now moving then the focus will go back to clearing debts x