Advice on Mortgage Application / Missed CC Payments

Neil_79

Hi

Here's my scenario:

My credit file is fine. My other half's has a blip across two credit cards 4/5 missed payments (on each card) from approx 12 months ago payment history since then has been on time.

She has £7000 on one card and £2000 on another. Were about to complete the sale of our home (I'm the sole mortgage holder) and will have £30000 from the sale. We will also have an additional £10000 as a gift from my family. I have a loan of £11000.

We will be moving in rent free with family and expect to save approx £3000 per month for as long as we can before we pick a home (new development).

My questions are these really :

I was planning on paying both of my partners credit cards off and then closing the worst one (missed payment wise) down. Leaving the other card open with a small limit of say £200 spending a small amount on the card and paying that off in full every month - this is an attempt to build up a history of good payments (she has approx 12 months without missed payments anyway).

Does this seem like a plan or does anyone have any other suggestions such as pay off both cards and close asap ?

Additionally from our monthly savings (£3000 per month) we hope to clear my Loan (£11000) - in this instance the question which I'm unsure even has a definite answer would be '' does it make more sense for the forecasted monthly savings (when we are living with family) to be added to our deposit or, is paying off my Loan debt going to give us a better chance of being accepted for a mortgage'?

Thanks in advance .

PS what does everyone think about using help to buy equity loan to get yourself a nicer home than you otherwise could afford ? will you be accepted ? does rejection affect your chance of a mortgage even if its for a cheaper house? Is there a lot of weighting put on this when banks are considering affordability ?

Lilla_D

Any outstanding credit commitment will reduce your potential borrowing by more than what your credit is, so it may be a good idea to pay everything off before applying for the mortgage. Then again, it all depends on your incomes and how much you're looking to borrow whether or not paying off your total £20k debt is necessary.

Closing down a credit card is not strictly speaking necessary, but paying it off in full every month, i.e. having a good credit history is more beneficial than having no cards and no credit history.

You could also save on interest if you repaid the full £20k from the sale, so at least your savings afterwards would be fully savings instead of paying the interest on the loan.

Having 4-5 late payments all showing as status 1 is different to having a cumulative late payment for 4-5 months with the former sounding better for lenders. If you could have 2 years between these late payments and the application, then you'd be in a better position than having 1 year in the clear.

Whether or not your mortgage application is accepted or rejected, is not showing on the credit file, but if you submit a second application for a certain property, then a question about any previous applications and why it didn't go ahead will have to be answered.

Thrugelmir

With the £30k of equity why not simply wipe the slate clean and start afresh. Then learn to budget properly and manage your money well. You may even surprise yourselves. When spending cash you'll think a lot more about the purchase than when simply pulling out the credit card.