How can I improve my credit rating?

kempstar

In April last year, I had a missed BTL mortgage payment recorded on my credit file due to a bank error. I took this complaint to the FOS, but unfortunately they found in the banks favour.

It seems to have had an enormous effect on my ability to get credit, namely mortgages. This is causing big problems for me, as I have started investing in property in the last couple of years, and now am struggling to get mortgages.

In November, I applied for a mortgage with Precise, but was declined outright due to the missed payment.

I have just been declined for another mortgage, this time with Paragon. I had to submit an explanation for the missed payment, which they accepted, and allowed me to apply for a decision in principle. However, it was then declined due to my credit score.

Im really not sure what to do, is it simply a case of waiting until time passes, and this missed payment becomes less important?

My earnings are £150-200k per year, and have been at this level for 3-4 years. I have four credit cards, three that I use very regularly, but pay off every month. They have relatively credit limits of £14k, £11k and £6k.

I also have another credit card with MBNA, with a credit limit of £40k, and a balance of £35k. This was all borrowed at 0%, then invested. I am wondering if this might be a big problem?

I have today obtained my Equifax and Experian credit reports, all the information was as I expected. I know the credit scores are fairly meaningless, but the Experian score was 764/999 (fair) and the Equifax one was 554 (excellent).

It is very frustrating because we have a house that we paid cash for, and have converted into an HMO, and now want to re-finance so we can start another project.

I am wondering if I should pay off the MBNA card and reduce the credit limit? And maybe reduce the credit limit on all the other cards?

My broker says I should still be accepted by Vida Homeloans, but the rates truly are awful, and it seems insane that that is my only option!

[Deleted User]

The MBNA balance won't be doing you any favours, even at 0%.

kempstar

Yes, I thought as much. Its very frustrating though, because having quick and easy access to effectively £37k of a very cheap loan is a handy thing to have!

Perhaps I should pay it all off, and reduce the credit limit to £10k. I could also reduce all the credit limits on all the other cards by 50% or so, perhaps more, as I really dont need them to be that high.

Superscrooge

£35K debt on a credit card will be regarded as a large debt, even if it is at 0%

I would clear this debt before making another mortgage application

kempstar

Do you think it is best to pay it down to £0 and reduce the credit limit to £10k? Or say pay it down to £5k?

kempstar

And do you think there is any need to do anything about the other credit cards? The £14k and £9k ones I could easily reduce by £12k between them, without any noticeable effect on my cashflow.

Superscrooge

Reducing the actual credit card debt is what will have most effect. I'm not convinced reducing the available credit will have much effect.

I've retired and my available credit is 3 x my annual pension. But this doesn't stop me being offered further credit.

From the Experian website...................

Total Credit Balance
If the total amount you owe across all of your credit accounts (excluding mortgages) is above £15,000 your credit score will decrease.

https://help.creditexpert.co.uk/help/sv635/Credit_Score/what_decreases_my_credit_score

So getting your credit card debt below £15,000 should be your first target.

bazzyb

If the missed payment marker is genuinely an error then you should be able to get it removed. This will be having a massive impact as it is a mortgage payment which has been missed.

Can you clarify what you mean by it being a banking error, and also why the FOS didn't agree with you?