Hey to improve my credit score in preparation for mortgage application.

1985rebs

Hi.
I have struggled with credit cards for a long time. I have previously tried to get a consolidation loan which worked for a while but am I made the mistake of not closing my credit card accounts. I had to leave my job and started using them again so have ended up with double the debt. I'm now in a secure job again earning the most I ever have. And have been making the payments and haven't missed any for years. However my card utilisation is high which makes my score weak. I am wanting to improve my score as much as I can as next year we would like to apply for a mortgage. I have 3 credit cards. I am nearing the end of my existing loan. Should I borrow more for the bank and consolidate the 3 cards....and cancel them this time? Or just continue paying? What would have the biggest impact on my score? Is it the amount of debt or the fact I have 3 cards close to the limit? Thanks

[Deleted User]

Always ignore your score. Remember that it has as much bearing on borrowing as your horoscope.

Pay down your debts so that lenders see you in a better light. More borrowing won't improve things

1985rebs

At the minute I don't feel like I am making much headway with it. I wouldn't be borrowing more, same amount but the debt would be in one place and easier for me to manage. I may even be able to make extra payments each month with the one loan. I would close the other cards..... or like you say does this not matter?

[Deleted User]

Post an SOA on the DFW boards. They'll give advice on cutting your costs and repaint faster

sourcrates

1985rebs wrote: »

I wouldn't be borrowing more, same amount but the debt would be in one place and easier for me to manage.

Ouch..........classic consolidator response there.


You have already consolidated once, and it did not work out for you as you made the classic schoolboy error of keeping the card accounts open, whats to stop you doing that again ?


You have done this once, so you have already paid a whole load of extra interest, now you want to do it again, and pay back even more interest, and look to get a mortgage in the near future........am I the only one who can see a problem with this scenario ???


You cannot borrow your way out of debt, it simply does not work unless you are 100% disciplined in your approach to it, the only way out of this is to cut back on your spending elsewhere, and to live within your means, a track record of consumer debt and consolidation loans will not bode well to a potential mortgage lender.

System

1985rebs wrote: »

At the minute I don't feel like I am making much headway with it. I wouldn't be borrowing more, same amount but the debt would be in one place and easier for me to manage. I may even be able to make extra payments each month with the one loan. I would close the other cards..... or like you say does this not matter?

It wouldn't matter. The mortgage company would look at the total level of debt you have and will offer less or refuse altogether if the debt to income ratio is too high.

You've already proven to yourself that for you debt consolidation does not work because you lack the discipline to cut back on your outgoings and not use more debt when there's something you want which you don't have the money for.

Rice and beans, beans and rice, not buying any clothes for the next couple of years unless you actually run out of them, not going out to the pub, stopping smoking and drinking if you do, packed lunches for work, no Costa or Starbucks on the way or at dinnertime and hammering down the debt is what you need to do.

1985rebs

Thanks. Unfortunately I know how bad my situation is and how bad I am with managing money. It wasn't luxuries I was using my cards for but everyday stuff...which I again know I shouldn't do... Just wanted some advice about the best way forward. I have the wage to cover the essentials and pay the debts...was just looking for advice on if having it in once place would be better. Thanks though. I'll move to the jungle.

System

It is how much debt you have, not where you have it which is more important. You should be moving it to an option where you pay less interest just to reduce the cost of it but that has to be done alongside closing any credit accounts that have been cleared as a result, i.e your existing cards. And again until you learn how to manage your money you're just going to dig a deeper hole.

Not managing your money is the root cause of your woes. One of the reasons you had to buy everyday stuff on credit is due to not having an emergency fund because of bad spending decisions in the past. This is something every single person will have done at some point, the difference is some learn from it earlier than others and put things in place so they don't repeat the same again and this is where you're at. You have the income now to both tackle the debts and put in place savings so you don't need to use credit again to get over a crisis. The real risk you have to avoid with the higher income is lifestyle inflation which is when you get a better car than you would've done, a higher grade mobile phone, spend more on clothes, buy a larger house than you would've etc etc ultimately leaving you with no more money in your pocket at the end of the month than you had before even though you may earn two or three times more.

DCFC79

1985rebs wrote: »

Thanks. Unfortunately I know how bad my situation is and how bad I am with managing money. It wasn't luxuries I was using my cards for but everyday stuff...which I again know I shouldn't do... Just wanted some advice about the best way forward. I have the wage to cover the essentials and pay the debts...was just looking for advice on if having it in once place would be better. Thanks though. I'll move to the jungle.

Reduce your spending to the bare bones, cancel the sky tv etc.

1985rebs

Thanks all. So basically just keep ploughing away at it and reduce as much as I can. I've never been good with money and I want to change that. I am not really extravagant with my spending but will try and cut it back even further. Hard with two kids though.. I'll cut back where I can and pay off what I can. That's all I needed to know. X

DCFC79

1985rebs wrote: »

Thanks all. So basically just keep ploughing away at it and reduce as much as I can. I've never been good with money and I want to change that. I am not really extravagant with my spending but will try and cut it back even further. Hard with two kids though.. I'll cut back where I can and pay off what I can. That's all I needed to know. X

Post over on the dfw board, its the 1 below the loans board, they will help you out.