No longer a wannabe - some questions

salfordfreddy

Hi all, I've been lurking around the past few years taking some brilliant advice from some very knowledgeable people on this here forum, so thank you very much.

At one point in 2018 I was in debt around £18k, I'm now all paid up and it is a great feeling. My credit file is all in order, no missed payments/defaults/ccjs, no minimum payments, no hard searches, etc.

In my excitement of clearing down this debt (October 2020) I decided to close my credit card account, perhaps a little too hastily. I now have 0 credit accounts, but a really good history as mentioned.

I am currently saving with my partner for a house deposit, we expect this to take around 12-18 months. My partner is also debt free with an excellent history, with 1 open credit card (paid in full each month).

Was it a mistake closing down my last CC account? Would it be wise to obtain a new cashback card, to use every day (and pay off in full)? I don't have any problems with spending and have been almost militant in my methods of clearing the debt and not running up more. My goal is to try and get the best possible mortgage rate. But I just liked the idea of having no accounts and no possibility to run up future debt. Even the smallest % change downwards in a mortgage rate would be less money paid in the long run.

Partner has a help to buy ISA but I have nothing at the moment, I'm considering opening a LISA, and having my partner's converted to a LISA, that way we can both stick in £4k and get £10k out. Is this a good plan?

Thanks again

fatbelly

Having one credit card and paying it off in  full each month has a lot of advantages, if you can trust yourself.

Having said that there are not many options outside Amex, unless you shop regularly at Sainsburys, M&S, Waitrose or Tesco, in which case you might try for one of those cards.

salfordfreddy

thanks, grabbed the amex platinum everyday and will use it for all my regular spending and pay off in full each month. realised that the hard search for this will drop off in 12 months anyway, so I didn't really have anything to worry about re mortgage app.

TheAble

I have a credit card myself and am not against them but a subtle aspect is that people do upon the whole tend to spend more on them than they would if they used cold hard cash. It's just a psychological aspect to be aware of.

salfordfreddy

Over the past couple of years I've basically turned into a scrooge and will question every potential purchase, so I'm hoping to continue that and not fall into a trap of spending due to having credit available. I also don't like the idea of having to wait to settle a bill (paying on credit card then not paying that bill until the end of the month), but if it all helps towards a better mortgage deal then I will have to get used to it.

enthusiasticsaver

Having a well managed credit card is useful when it comes to mortgage applications. Only get one if you can trust yourself not to overspend on it though. Well done on getting rid of the debt. A LISA is a good idea for you  but I am not sure of the benefits or pitfalls in converting a HTBISA to a LISA. 

madaboutspots

You don't need to wait for the CC bill to be produced/arrive.... I've bought things I have the money for on CC either for points or protection and 10 mins later paid the CC bill from my bank. I still get the protection offered by paying by CC and also the points! 

It's a good way to buy safe, get the meagre bonuses offered AND keep your credit score bustling along in the right direction. Also means you don't accidentally fall back into bad habits. 

greensalad

I transfer every spend into a Monzo pot when the spend occurs, and then pay off the CC with the pot. Basically removing the cash you've "spent" on CC but not had to physically pay for from your general cash flow helps you not go overboard.

SoXBoX

I was concerned about this myself as I wanted to keep credit usage at around 20% (I was told this was the golden ratio for mortgage lenders) I dropped down from a 10k limit to a £500 limit and I set up my sky bill to be paid from the card (they can do a continuous card payment instead of direct debit). Cut up the card as I'm an impulse buyer at heart and just have a direct debit paying it off in full every month. My score has improved even though I've cut my available credit down and it looks like I'm using credit responsibly!