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Reducing available credit for mortgage application
DrSpendLittle
Posts: 698 Forumite
Hi all,
We've been indecisive about whether to sell and move for the past 12 months but are once again thinking of it, so I'm thinking through our finances and how best to prepare ourselves to get a decent mortgage deal. We'd be looking at a LTV of 74.99%.
During the past 11 months, I have completely changed my spending habits and reduced my consumer debt from nearly £14k to just under £5k. I've cleared an overdraft, car finance and two credit cards. My oustanding credit card debt is the only debt we both have. Our cars are paid off and we've no other loans or credit agreements.
I currently have £24,200 of available credit spread over three credit cards.
CC1: £11,750 limit with £NIL balance
CC2: £10,450 limit with £4,999.99 balance
CC3: £2,000 limit with £variable balance as is used for monthly spends but cleared in full every month.
Current utilisation is therefore 20.66%. This excludes a £1,200 unused overdraft facility.
Question: Should I close CC1 to reduce my amount of available credit in order to make myself more attractive to lenders? Will closing the card affect my credit file in any way or be seen as anything other than positive from a lenders perspective? Would it put lenders off? My new utilisation would be 40%, so would go up temporarily but I'm hoping to clear CC2 by November 30th. We may be looking into mortgages by then. I suppose my utilisation rate will get better as each month passes.
We've been indecisive about whether to sell and move for the past 12 months but are once again thinking of it, so I'm thinking through our finances and how best to prepare ourselves to get a decent mortgage deal. We'd be looking at a LTV of 74.99%.
During the past 11 months, I have completely changed my spending habits and reduced my consumer debt from nearly £14k to just under £5k. I've cleared an overdraft, car finance and two credit cards. My oustanding credit card debt is the only debt we both have. Our cars are paid off and we've no other loans or credit agreements.
I currently have £24,200 of available credit spread over three credit cards.
CC1: £11,750 limit with £NIL balance
CC2: £10,450 limit with £4,999.99 balance
CC3: £2,000 limit with £variable balance as is used for monthly spends but cleared in full every month.
Current utilisation is therefore 20.66%. This excludes a £1,200 unused overdraft facility.
Question: Should I close CC1 to reduce my amount of available credit in order to make myself more attractive to lenders? Will closing the card affect my credit file in any way or be seen as anything other than positive from a lenders perspective? Would it put lenders off? My new utilisation would be 40%, so would go up temporarily but I'm hoping to clear CC2 by November 30th. We may be looking into mortgages by then. I suppose my utilisation rate will get better as each month passes.
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Comments
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Just make sure your bills are paid on time and don't start closing accounts trying to second guess what a lender wants.
The kind of micro-management you are suggesting just isn't needed.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
You got me in one! Always the over thinker. Thanks for taking the time to comment.0
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Mortgage Lender don't care about available limit on CCs, all they care about is balance and monthly outgoings servicing debt.0
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