Pay the loan off before applying for another loan?

Willing2Learn

Having those two credit cards and paying off their balances in full is a good thing to have on your credit files. It would definitely be a good idea to check your credit files have all the data correctly recorded. Check with all three CRAs - it is free.

David2018

Willing2Learn, historically I have managed my debts well and I have good/excellent credit scores, depending on the CRA. My salary from my employment will, of caurse, be same for both option. So, what would be your advice, to pay the existing loan off before applying for the new loan or not to pay off?

Willing2Learn

You credit score does not matter. A lender does not see or use your credit score. They make their decision based on the data held by the CRAs and the data you provide in the application. That is why it is good to check your credit files, to ensure all the data is correct and accurate.

As far as your current loan goes. If it were me, I would want to pay the loan off early, but keep using the cards freely so that your history keeps building. (And keep paying the balance(s) in full after the statement is received).

foxy-stoat

Just apply now, it takes about 5 minutes to do an online application - report back with the results.

If your annual salary is over £40K with minimum debts then good luck.

David2018

Deleted_User wrote: »

As many as possible.

I have heard that having an instalment loan for long time is good for credit history increases credit rating, i.e. chances to get a loan easily or get larger amount of loan. Your advice seems to me to be in contradiction to that. Is it because I am going to apply to the loan soon and otherwise it would be beneficial?

[Deleted User]

A loan can build history but it shows you need to pay interest. Using a credit card is a cheaper and more effective way of building history.

A continual demonstration of needing to borrow can deter lenders. Show lenders you can live without debt, at least for a while.

Continue using the card regularly and clear in full each month.

David2018

Deleted_User wrote: »

A loan can build history but it shows you need to pay interest.

it is 0% interest loan.

[Deleted User]

Then it's not such an issue, as long as it shows as a promo rate on your credit files.

However, I would still be looking to create some space between loans though.

David2018

Deleted_User wrote: »

Show lenders you can live without debt

Let me ask you a theoretical question. Let's assume the first way, a person lived in the country for 3-4 years, to be living without any credit, i.e. no loan, no credit card, no pay monthly phone SIM card, though it is probably impossible to not to have an internet credit account, but anything else to bear minimum.
The second way is same person living with credits, i.e. 4-5 credit cards (paying in full after each statement), 4-5 store cards, credit accounts, 0% furniture loans and much more, only for the sake of building a credit history. No late payments, no defaults, everything in perfect standing. Let's assume everything else was the same. What do you think, after 3-4 years, in which case would the person have more chance to get large loan, in first or in second.

Sorry if I have too many questions, but you seem to be knowledgeable person and i am trying to use the chance to gain understanding.

Thanks.

[Deleted User]

The second would be preferable as it shows some history of managing credit.

However, it would be better still if there was person 3 who was not so reliant on the on the loans.