Mortgage and credit rating

adidas

Hey - sorry if this question has already been asked, had a quick look on the forums and couldn't see it anywhere. Basically, at the moment I'm a student and I have taken up Martin's idea of maxing out my overdraft and putting it in a high interest account. Only thing is I have applied for 2 credit cards this year and been refused, obviously because I'm overdrawn (checked on experian and can't see any other reason for me being turned down). A friend told me that credit reference agencies can see 3 years into your past accounts, is this true? If this is the case then I need to start paying back my overdraft now so that my credit looks good in 3 years time by the time I apply for a mortgage! Or could I leave the OD maxed out until say...3 months before I apply for a mortgage, and still be accepted? So the question is, should I pay it off now or leave it til 3 years time?

Your thoughts and comments are most welcome.

luckyfool

They only see the current balance, not historic balances. As they are brought up to date monthly then you should be fine if you pay if off 3 months in advance. They see historic payment records though so they can see if you have a track record of missing payments or making them late so watch out for that.

As far as the credit card goes you may want to apply for a card from Barclaycard or Capital One as they both rate for risk, so even if you score poorly they are likely to offer you something, even if potentially at a high rate and with a low limit. You can then spend on it and pay it off monthly to avoid paying interest but to also improve your credit score.

kevinchapman82

I've never known a mortgage application to be turned down due to a well conducted overdraft. As long as you stay within your limit it shouldn't cause you any problems.

If the overdraft is the only debt you have ever had, you are more likely being declined for credit cards due to having no positive history, as oppose to anything to do with the overdraft. Lenders like to see borrowers who have borrowed in the past and paid it back.