Improving Credit Rating/History for mortgage

MW2208

Hi all,

I know this has been discussed countless times in the past, but I feel i may have read too much and am now incredibly confused about how to best proceed..

Basically, I am in my late 20s and trying to come up with a ‘plan’ of how to most efficiently/effectively improve my credit rating to get a mortgage within the next few years and would appreciate any help

My ‘scores’ are pretty terrible (i know they are just a gimmick, but right now i have little else to use as a measure of improvement) due to some CCJs (now settled) from early 2013 and late 2014.

I have the following account
Credit card 1: 3k limit / 2.7k used
Credit card 2: 1.5k limit / 450 used
Very Account: 1k limit / 800 used
Arrange overdraft £50 / unused
Paypal credit account: £750 limit / unused
Car finance: 1 yr old, 4yrs / ~10k outstanding
Phone contract: ~30 per month (another 13 months till i can cancel)
No defaults on any missed payments or accounts.

As you have figured from the above I’ve burried my head in the sand most of my adult life about my credit history and ignored until the past few months when i realised i needed to sort it out.

My rough calculation show that i can clear the credit cards and very account by the end of march and potentially my car by the end of 2019 or mid 2020....

Obviously the first few steps would be:
1. Pay CCJs (done)
2. Pay credit cards
3 wait for CCJs to drop off

What else can i do to help boost my ability to lend at an affordable rate when the time comes?
I also understand that i need to keep using my credit cards to use them to build history, but what is the best way of doing this?
As far as lenders are concerend would they view one large credit limit the same as multiple smaller limits with the same total value (i.e. 1 card with a 5k limit vs 5 cards with 1k each)?

Any help is appreciated

cjv

Your CCJ's will drop off your credit reports 6 years after the date they were first registered, so 2020?

Paying off your credit cards will always be a good thing.

Then just use a credit card for a small amount of regular spending and pay it off in full each month.

Never miss a payment and you should be fine, start saving for your deposit!

Craig1981

your combined utilisation of your credit/store accounts are at 65%, excluding the car finance

what you clear first will depend on the balance and the APR amounts for each card. if you can clear them by March, then do that, along with Very. Do not close these cards once cleared, as suggested above, use them often, but clear them in full. setup a Direct debit with the accounts to clear in full each month

what type of car finance do you have?

for savings for a deposit/mortgage, have a look at help to buy ISA or Lifetime cash ISA - these are designed for first time buyers, and there is 25% bonus on what you save when it comes to buying a property

[Deleted User]

What’s your salary?

MW2208

what you clear first will depend on the balance and the APR amounts for each card. if you can clear them by March, then do that, along with Very. Do not close these cards once cleared, as suggested above, use them often, but clear them in full. setup a Direct debit with the accounts to clear in full each month

CC1 is 0% until June, CC2 is 0% until October and very is 0% until 1 year after purchase (think around august) So apr isn't a concern for me right now... My initial plan was to put the money aside each month into a savings account to earn some sort of interest and pay them off just before the 0% offer expires, but I have a terrible habit of forgetting to do things like that and, once again, I forgot. So now the plan is to just get them paid off so I don't have anything to forget about.

what type of car finance do you have?

umm... i'm not sure of the name, I just pay a regular amount each month and own it outright at the end...

What’s your salary?

~70k, I didn't think salary counted towards credit ratings (other than for affordability on things like loans and when I actually get the mortgage, of course)

[Deleted User]

MW2208 wrote: »

~70k, I didn't think salary counted towards credit ratings (other than for affordability on things like loans and when I actually get the mortgage, of course)

That's the whole point. There are no credit ratings - you're assessed at time of application, which includes your income as well as your credit history.

MW2208

That's the whole point. There are no credit ratings - you're assessed at time of application, which includes your income as well as your credit history.

Yes, understood that. My confusion was around how my salary could help improve my overall credit worthiness...
I guess my main question is, other than getting a pay rise, what should I really be looking at doing to improve my “desirability” to potential lenders (mortgage or otherwise) Is there a typical income:lending ratio they look for etc? Or is it purely based on history of repaying on time etc.

Another note - is there any use of me using my “scores” as a benchmark to watch progress or is it just a wasted effort?

[Deleted User]

No point in using your score at all, as it's far too unreliable.

Lenders will use your income to assess risk, as well as affordability.

Your overall aim should be to clear all debts and the use credit only when it doesn't cost you anything. So using a card and clearing in full each month, or 0% offers. Show that you can use credit but you don't rely it.

MW2208

Thanks ZX81 (and all others) at least I know I’m on the right track for long term improvements!

[Deleted User]

Salary pays a part of when a lender assessEs your credit worthiness - they will look at salary compared to your current used and available credit.

Ignore the scores as already said and get your current debts cleared down.

Then start using a CC and paying it back in full each month following the statement being issued