Mortgages & credit balances

akh_2206

Morning all,

Me and my partner are currently saving towards a deposit with the hope of looking to buy and therefore apply for a mortgage in about a years time. I've been doing all the reading up I can and want to be prepared as possible for the application as quite frankly the whole process seems to be a nightmare so I want to be going in to it by giving us the best chance possible.

Historically between the two of us we had debts amounting to £20k (hello irresponsible early 20's!) which up to this point we've pretty much halved. I'm confident by this time next year we will be in an even better position however my question today is credit balances. As we've paid off credit cards and overdrafts I'm unsure what balance should remain to appear reasonable to lenders. for example I had an overdraft facility of £1,600 - I am no longer in the overdraft but am I better off leaving the facility as is, reducing to say £500 or remove all together? Same with the credit cards, we have one each and whilst I don't want to close the accounts from what I'm reading a large limit would appear to lenders as a potential red flag? There seems to be a very fine line for credit utilisation so was just after some advice of what is the most appealing to lenders.

Thanks in advance.

dimbo61

Pay off your overdraft ASAP as this is very expensive borrowing and then consider reducing your credit card balances.
If you apply for a mortgage with say £15/20,000 of available credit it might make lenders nervous.
Same with living in your overdraft it sends out the wrong signals.

akh_2206

Thanks for replying, I'm thinking of reducing my available overdraft from £1,600 to £500 so overall my available credit will be about £4,000. Helpful to know what amounts might make lenders nervous - thank you.