Have I made a huge mistake by paying off debt...?

ds090

Hey,

I know that there aren't any hard and fast rules when it comes to credit scores - however I think I may have messed up mine by having the best of intentions.

I've recently paid off an interest free retail loan and two credit cards (total value of all around £6000) - and subsequently closed the accounts.

I thought that this would make me look like a responsible lender. I have a mortgage in principal and am looking to begin the mortgage application process next week. Paying off those debts was recommended by my mortgage adviser to secure a better rate.

However, looking online and on different forums, it seems that paying off debt and being debt free in a short space of time may be detrimental.

Does anybody have any advice on whether my actions will severely ruin my credit score?

[Deleted User]

Paying off debt makes you look much better to lenders.

Credit scores don't reflect that - they prefer you not to make changes, either good or bad

However, make sure you still have two or three credit cards that you use regularly.

pinknsparkly

zx81 - can I ask why you say "two or three" credit cards? Why do you feel that is more advantageous than just one credit card? I have always been under the impression that credit history requires you to demonstrate sensible use of credit, including paying it back on time which can be adequately done with a single credit card?

pinknsparkly

And ds090 - as zx81 says, the lender will be looking at your credit history, not your credit score. Whilst any change in your financial circumstances will cause a temporary drop in your credit score, paying off debt will indeed improve how the lenders view you. Don't worry!

[Deleted User]

pinknsparkly wrote: »

zx81 - can I ask why you say "two or three" credit cards? Why do you feel that is more advantageous than just one credit card? I have always been under the impression that credit history requires you to demonstrate sensible use of credit, including paying it back on time which can be adequately done with a single credit card?

It shows that more than one lender trusts you.

It also indicates you're smart enough to know that you need a back up for when your other cards are declined or closed.

You"ll also want the different benefits of different cards.

System

ds090 wrote: »

However, looking online and on different forums, it seems that paying off debt and being debt free in a short space of time may be detrimental.

Does anybody have any advice on whether my actions will severely ruin my credit score?

That'll be advice from either Americans where unlike the UK credit scores do matter, or if UK forums from the stupid, those who don't understand that the credit score generated by the credit reference agencies means diddly squat in this country. We're slightly better informed here.

Whilst it may change the mickey mouse made up number that no lender uses as they generate their own internal score, it won't harm but actually improve your position with lenders especially mortgage lenders.

pinknsparkly

Deleted_User wrote: »

It shows that more than one lender trusts you.

It also indicates you're smart enough to know that you need a back up for when your other cards are declined or closed.

You"ll also want the different benefits of different cards.

Thanks. I actually have a second purchase credit card that I use only rarely (it offers cashback but only for limited vendors), maybe I'll start making an effort to use it more frequently! I also have a 0% balance transfer card that I'm stoozing which I guess also counts in this scenario.