Credit File

cabibw

Hope somebody can help me!


I have been looking at my credit file and it states that I have a score of 999 but very weak on loans and credit card affordability. I am about to make an application for a new mortgage and I'm trying to sort out my finances.


I have a personal loan (£9,500 over 5years £178 pm) and an outstanding credit card balance of (£8,000 @ 0% and I make the min payment each month approx. £80). As I want to make an application for mortgage I need advice as to which one I should pay off to make me a 'better' bet for lenders?


Any suggestions?


Thank you

[Deleted User]

If you're going to pay one off, it should be the one charging the most interest.

cabibw

Which debt if paid off would make the best impact on my credit history or would look best to a lender?

National_Debtline

Hi Cabibw and welcome to MSE,


Difficult to answer but zx81 makes a good point to overpay the debt with the highest interest. In your situation, that would be the loan for the moment, so just be mindful of potential penalties for overpaying. (Can you do this? Is there a limit by how much)?


When you apply for a mortgage you will normally have your credit file and affordability checked by the bank. They can deduct the payments you make on credit from your affordability to mortgage payments. They may ask you how long your credit card is going to be interest free for, what is the rate of interest after this period, would that be affordable coupled with everything else?


You may want to consider speaking to an independent financial advisor or broker to help guide you. Just watch out for costs/ fees.


Laura
@natdebtline

[Deleted User]

Either. They're both debts and counting against your affordability.

cabibw

Many thanks

ShivasPlace

Deleted_User wrote: »

If you're going to pay one off, it should be the one charging the most interest.

Would it depend on how long the 0% interest lasted for and how long £80/month would take to pay it off?

Anthorn

cabibw wrote: »

Hope somebody can help me!


I have been looking at my credit file and it states that I have a score of 999 but very weak on loans and credit card affordability. I am about to make an application for a new mortgage and I'm trying to sort out my finances.


I have a personal loan (£9,500 over 5years £178 pm) and an outstanding credit card balance of (£8,000 @ 0% and I make the min payment each month approx. £80). As I want to make an application for mortgage I need advice as to which one I should pay off to make me a 'better' bet for lenders?


Any suggestions?


Thank you

As previously stated by others, the amount of the debt related to income could have an effect on your affordability. However, most services providing an affordability ratio including MSE Credit Club do not describe the algorithm by which affordability is calculated. You could try the old method by calculating how much you have left after everything is paid which gives your disposable income and then divide that by a three to arrive at the repayment you can afford (your affordability).

Your credit history is not the be all and end all of making an application. The first thing which passes in front of a lender is the application (form) so that needs to be considered and even planned for. For example a lender will need evidence that you are in fact living at the address you provide. One method is the electoral register and another method is a landline telephone number which is listed in the telephone directory. Being associated with an old landline number which is no longer yours can be a disaster.

It all comes down to common sense really.