Pay my credit card using my savings?

Njp

Good afternoon everyone,

I currently owe just under £4000 on my credit card. I make my payments every month but due to the interest being added I don’t seem to be getting anywhere in regards to paying it all off!

I’m 23 and haven’t really been able to build a great credit rating yet as I still live at home etc. I have had a look into balance transfers to help with reducing the interest but it is looking unlikely that I will be accepted for the large amount, and I don’t want to apply and be rejected in the risk of making my credit rating worse.

I have recently been given £5000 by my parents from some inheritance which they would have liked me to use towards a deposit for a house.

Would it be wise for me to use this inheritance to pay off my credit card? But then being left with nothing to put towards a new home and having to spend another couple of years saving.

Thanks in advance for your advice!

[Deleted User]

Pay off the debt. You'll rebuild the savings much quicker and will be in a better position for a mortgage when the time comes.

Though you should at least try for a BT card.

SeduLOUs

Agreed. Pay off the debt, and put the remaining amount in a LISA.

Now that you aren't paying off debt anymore you can save regularly for your deposit. You'll be back up to £5k in no time, because it's much easier to be motivated to see savings grow than to battle with a credit card balance.

Just don't rack up the credit card debt again!

chattychappy

Agree with the posts above.

Njp wrote: »

I’m 23 and haven’t really been able to build a great credit rating yet as I still live at home etc.

Disagree with this comment. I believe lenders see living with parents no worse than renting and probably better. Of course being a homeowner is better, but then with higher outgoings (mortgage) you can still have financial troubles which could knock your rating down.

Certainly you can look good from a credit point of view when living with parents. I had a 20K limit on one card whilst living with parents - and that's a good few years ago now!!

If you:
1) use a CC each month, paying off more than the minimum*
2) are on the electoral roll
3) ideally have some other stuff going on: mobile phone contract, second CC
4) don't keep changing addresses
5) don't miss payments/go over limit

Then your credit history will look good. How much you can borrow when you make a particular application for new credit will take into account the history but also what you put down in terms of income etc.

*of course you should pay off in full to avoid interest. But purely from a credit history point of view, anything more than the minimum is enough so you don't look distressed.

Potbellypig

Is £5k even going to get you on the property ladder? It's alright saying I need £5k for a deposit, but there's solicitors fees and all the other associated costs with moving into a new home.

Chino

Potbellypig wrote: »

Is £5k even going to get you on the property ladder? It's alright saying I need £5k for a deposit, but there's solicitors fees and all the other associated costs with moving into a new home.

The OP never claimed that £5,000 would be sufficient for a deposit (my bolding):

Njp wrote: »

I have recently been given £5000 by my parents from some inheritance which they would have liked me to use towards a deposit for a house.

toontastic

Get shot of your debt and build up an emergency fund and deposit before buying a house, else you'll be back years from now with even more debts due to a boiler packing in and having no cash to fix it.

ViolaLass

You can build a perfectly good credit history (which is the bit that matters) while living at home. Pay that credit card off in full and then keep using it and paying it off in full every month, for a start.

jon1965

If you do pay it off, which sounds like a good idea , just make sure you are not tempted to use your credit cards again unless you can pay the balance off in full each month.

If you add up all your minimum payments , bet it won't take too long to build that 5K up again

Curls2208

Yeah pay off the debt, the golden rule is always pay off debt before putting money towards savings...I think the only time this logic doesn't apply is when it comes to student loans.