Do I Pay off my cards in full or keep one and pay balance each month?

rcunningham87

Hi Guys,

I've got myself into a bit of a pickle and have an "Average" credit score according to Experian. My aim is to improve this ASAP and look to get a mortgage in the next few years (But only after my cards and debts are paid off etc.)

I have 2 credit cards I currently pay the minimum (I'm able to pay off more each month but this could take some time). I'm looking to get a P2P loan to pay off the cards and get a newer car. But I'm worried that I'll be refused the loan and it'll affect my rating even more.

My question is, is it better to keep one of the cards and pay it off in full each month to improve my credit rating?

I guess my question is, what is the quickest way to improve my credit rating considering my situation and get debt free?

Thanks in advance.

StopIt

Getting a loan to pay off credit cards will not help.


Getting a mortgage requires a deposit, so being in debt will be taken off any savings in calculations by your mortgage broker.


Clear your debts, go to the DFW boards for help with doing so (Read the stickies there).


Getting a mortgage is based on affordability, not your credit score. Your credit history will be a key indicator, so the key signs of debt distress like consolidation loans, paying only minimum payments on credit cards etc will affect you.

rcunningham87

Hi,

Thanks for your reply.

I'm not looking to get a mortgage straight away, just want to use the loan to clear my debts first and then look at getting a mortgage. Would this be okay?

[Deleted User]

rcunningham87 wrote: »

I have 2 credit cards I currently pay the minimum. I'm looking to get a P2P loan to pay off the cards and get a new car.

If you're paying minimums on the cards, and need a loan to clear them, you cannot afford a loan for a new car.

That would turn your current pickle into a full blown chutney.

rcunningham87

Love the analogy!

what I mean is my cards are down as minimum payment but I'm able to pay more to work on clearing the balance.

StopIt

rcunningham87 wrote: »

Hi,

Thanks for your reply.

I'm not looking to get a mortgage straight away, just want to use the loan to clear my debts first and then look at getting a mortgage. Would this be okay?

Using a loan wont clear any debts. You'd be moving it, and potentially paying more interest over the term of the loan than if you had snowballed the CC.


You still need to fund a deposit to get a mortgage, having a loan on file will be taken away from any deposit in your affordability calculations. Get to the DFW boards, read the stickies (Read up on snowballing). Downside your expectations of a new car, and work towards getting to a debt-free platform which you can save for a deposit.


Remember, bigger deposit = lower LTV = lower interest rates.

rcunningham87

"You still need to fund a deposit to get a mortgage, having a loan on file will be taken away from any deposit in your affordability calculations."

I understand deposits and LTV for better rates but would this loan still affect affordability calculations even once the it's fully paid off???

rcunningham87

What I meant is, I'm able to pay more than the minimum but it's taking time and would like to clear the balance's ASAP if that makes sense. Just trying to find the quickest way to improve my credit score.

[Deleted User]

rcunningham87 wrote: »

Just trying to find the quickest way to improve my credit score.

See post 2. You don't have a score. You may as well try to change the colour of unicorn poo.

You need to build a good history. Clear debts if you can, pay as much as you can if you can't clear, don't take on new debts if you can avoid it.

StopIt

rcunningham87 wrote: »

What I meant is, I'm able to pay more than the minimum but it's taking time and would like to clear the balance's ASAP if that makes sense. Just trying to find the quickest way to improve my credit score.

Mortgage lenders don't care about the score, they care about your history.


If you're able to clear your debts, do so. Your credit history will look better with cleared debts than with them. I hate to repeat myself but you're not clearing anything by getting a loan.


If you're able to pay off a loan, you can pay off these credit cards. Again, please look at the DFW boards and use the snowballing calculators.

Candyapple

Enter your debts here and pay them off accordingly:
http://www.whatsthecost.com/snowball.aspx

How much do you owe on the cards?

In order to get a mortgage you will need to clear your debts and then start saving as much as possible.

You will need to manage your expectations and make tough decisions now to benefit in the future such as do you really need a new car? Or can you manage a while longer with your older one until you have cleared your debts?