First time buyer mortgage and credit cards

rebmunns

Hello!

My husband and I are looking to buy a house this year.

I have two credit cards, one with a limit of £11k and the other £6,250. I have had both credit cards for a long period (one since 2006 and the other since 2012) and whilst both cards have some balance on them (around £5k split between both cards), I have always paid them each month (although not always in full) and I have never defaulted on a payment. I've checked my credit rating which is in "excellent" according to both experian and equifax.

Now, my question is this. Before we go to a mortgage broker, I want to pay both balances off in full. However, should I keep the cards open and continue to use them (although pay them off in full) each month, or should I close them both? If I keep them open, would the best option be to lower the credit limits? If so, what to? I've read that some lenders take see a large credit limit as a negative (even if it's not being used).

Any advice much appreciated.

sh856531

rebmunns wrote: »

Hello!

My husband and I are looking to buy a house this year.

I have two credit cards, one with a limit of £11k and the other £6,250. I have had both credit cards for a long period (one since 2006 and the other since 2012) and whilst both cards have some balance on them (around £5k split between both cards), I have always paid them each month (although not always in full) and I have never defaulted on a payment. I've checked my credit rating which is in "excellent" according to both experian and equifax.

Now, my question is this. Before we go to a mortgage broker, I want to pay both balances off in full. However, should I keep the cards open and continue to use them (although pay them off in full) each month, or should I close them both? If I keep them open, would the best option be to lower the credit limits? If so, what to? I've read that some lenders take see a large credit limit as a negative (even if it's not being used).

Any advice much appreciated.

I can't say how big a difference this made but we saw anecdotal evidence that the amount of credit we had available to us was counting against us when enquiring about a mortgage

I had a large amount of credit available to me across two credit cards - something like 13.5K available but I only used the cards for air miles. I naively thought this discipline would endear me to the lenders.

Anyway - we got a fairly crap offer from Nationwide that the guys in the branch were surprised about given our credit history/income etc. Long story short - the only thing I could put it down to was the fact that I could go out at the drop of a hat and spend 13K on whatever at very short notice.

I dropped the cards down to a collective 2.5K limit and reapplied for a mortgage some months later. It went straight through on a very competitive rate and the only difference would have been that available credit thing.

This is all anecdotal of course. That said I would do the same thing again as you would want everything to be lined up in your favour.

Good luck

S

sh856531

I also meant to say - I kept both cards available though just with a lower limit on each, rather than fully close them down. I heard some advice saying that closing the cards down completely was harmful, though I never fully believed it. Their payment history would be on record for many years whether open or closed

HTH

S

rebmunns

Thanks so much for the reply. My husband's suggesting that maybe I close one of the cards completely but keep the other card open. Do you think that could be a good option, or do you think I should keep both with a lower limit considering I've had both for a long time?

kuratowski

The thing is what happens if the card gets lost or stolen, and you only have one. Or if the bank has an IT meltdown. You could be without a card for a few days. Provided you have the discipline not to spend money you don't have and always pay off the full statement balance, I would keep the two cards.