Loan Application before Mortgage Completion

laurena1990

Thank you everyone for your help so far. Does anybody know if closing an account with an available overdraft will help please?

Nebulous2

laurena1990 wrote: »

Thank you everyone for your help so far. Does anybody know if closing an account with an available overdraft will help please?

Who is helping you with your mortgage? Do you have a broker?

You should really be asking them. The general idea is not to change anything before completion. Lenders like stability, with no surprises.

laurena1990

Thanks, we're just trying to understand what might happen at the moment. Waiting for our credit reports to update for this month then we'll speak with them.

-taff

laurena1990 wrote: »

Thank you. Is it seen as a further commitment though as it has cleared £3500 of credit card debt? The credit card has been closed so the debt has been transferred to a loan instead of increased.

Your thinking is wooly.

£3,500 of debt is £3,500 of debt, whether that's a loan or a credit card.

Gaz83

-taff wrote: »

Your thinking is wooly.

£3,500 of debt is £3,500 of debt, whether that's a loan or a credit card.

In fairness, the OP does seem to acknowledge that the debt is still there, she specifically asked if it would be seen as "further commitment".

If the credit card has indeed been closed, then it should not be seen as "further commitment" IMO, but of course lenders may have a different opinion to me.

laurena1990

Gaz83 wrote: »

In fairness, the OP does seem to acknowledge that the debt is still there, she specifically asked if it would be seen as "further commitment".

If the credit card has indeed been closed, then it should not be seen as "further commitment" IMO, but of course lenders may have a different opinion to me.

Thanks Gaz83. I understand that the debt amount is the same.
My main worries are the following:
1) The credit card closure will take a long time to process, therefore making the loan look like an extra commitment when we come to complete.
2) A personal loan of £3.5k looks worse in terms of an affordability check than £3.5k of credit card debt
3) A new loan application between exchange and completion would upset our credit score

The loan application and credit card closure was processed in December and we're not due to complete until March/April so hopefully all will be fine.

We should know more next week once we've spoken with the mortgage advisor.

DCFC79

But remember even if it upsets the score no 1 else can see it.
Just need to hope its all ok.

laurena1990

DCFC79 wrote: »

But remember even if it upsets the score no 1 else can see it.
Just need to hope its all ok.

Thank you, what do you mean no 1 else can see it? Won't they check this before completion?

Gaz83

laurena1990 wrote: »

Thank you, what do you mean no 1 else can see it? Won't they check this before completion?

No, lenders don't see the credit scores issued by the likes of Experian. Scores are a marketing tool used by the CRAs to encourage people into paying £15 a month to see them. There's no such thing as a credit score.

Lenders base their decisions on the information on the credit report. Lenders may very well have their own internal scoring mechanism but they don't make that information public.

laurena1990

Gaz83 wrote: »

No, lenders don't see the credit scores issued by the likes of Experian. Scores are a marketing tool used by the CRAs to encourage people into paying £15 a month to see them. There's no such thing as a credit score.

Lenders base their decisions on the information on the credit report. Lenders may very well have their own internal scoring mechanism but they don't make that information public.

My main concern is how the lender sees the personal loan, whether it is classed as a bigger impact on affordability than the credit card. The monthly costs are pretty much the same and the interest rate is lower with the loan. I've just read so much about how sensitive credit reports are to changes like this and in some cases it might be better to have a credit card than a loan?