Debt to income ratio Too Low - will this impact mortgage applicaiton?

belfast111

I got my latest MSE credit club report and it now says my Debt to income ratio is too low.

.....then this amber status may be because you have little or no credit. Bizarrely, this can put lenders off, because if you don’t have any credit, they don’t have a reliable indicator of whether you handle it well. Without this, you may be declined – even if you’re able to easily repay.
Can this impact mortgage applications? If so is there any way to 'fix' it?

[Deleted User]

What actual credit history do you have?  Check all three files.

belfast111

I have 1 credit card thats paid in full each month (average about £100 a month) and no loans. I have telecomms contracts for phones and tv etc thats paid monthly as well. 

[Deleted User]

Another card or two wouldn't go amiss, for back up as much as additional credit history (you could struggle if your only card gets closed), but it's not going to cause you any particular problems, especially if you've had the card a few years.   But do check all three files, as it may not appear on all.

Generally, you can ignore any of the comedy warnings from the CRAs.

finalfantasist

So MSE are effectively encouraging people to load up on debt?  Stay classy MSE, stay classy.

MattMattMattUK

finalfantasist said:

So MSE are effectively encouraging people to load up on debt?  Stay classy MSE, stay classy.

Not at all, I have three credit cards, total available credit is around £35k, actual credit at the end of every month will be zero as I pay in full, at any point in a month it could vary from a few hundred to maybe a thousand in normal times, or higher if I made a large one off purchase using the card for extra protection, however I would still pay it off at the end of the month.

People can have the facility for credit, without having to accumulate debt. I have an overdraft, I do not use it, I have a reasonably large amount of available credit on cards, I do not use it, just because one can have the facility available, and demonstrate responsible use of that facility, does not mean anyone is encouraging them to "load up on debt".

MaryNB

I have one credit card. I rarely use more than 10% of the limit but I use it every month and pay it off in full. The months before my mortgage it was less than 5% and I got the same message from MSE. Had no impact on my mortgage application.

Fighter1986

Thankfully MSE don't lend so their opinion of your debt to income ratio is somewhat irrelevant. 

The results of pre-application checks with actual lenders will give you an honest appraisal of what each lender things of you.

belfast111

Thanks for all the opinions. Its put my mind at rest. The 1 card I have has £7.5k available on it but as I say is rarely over a few hundred pounds per month. I thought that would be a good indicator that I can manage debt to lenders :-)

Fighter1986

belfast111 said:

Thanks for all the opinions. Its put my mind at rest. The 1 card I have has £7.5k available on it but as I say is rarely over a few hundred pounds per month. I thought that would be a good indicator that I can manage debt to lenders :-)

It is. 

finalfantasist

MattMattMattUK said:

finalfantasist said:

So MSE are effectively encouraging people to load up on debt?  Stay classy MSE, stay classy.

Not at all, I have three credit cards, total available credit is around £35k, actual credit at the end of every month will be zero as I pay in full, at any point in a month it could vary from a few hundred to maybe a thousand in normal times, or higher if I made a large one off purchase using the card for extra protection, however I would still pay it off at the end of the month.

People can have the facility for credit, without having to accumulate debt. I have an overdraft, I do not use it, I have a reasonably large amount of available credit on cards, I do not use it, just because one can have the facility available, and demonstrate responsible use of that facility, does not mean anyone is encouraging them to "load up on debt".

They're specifically referring to debt though, not credit limits, so I stand by what I said that they are encouraging people to take on debt.  If they're trying to refer to credit limits they're doing a very poor job of it.

Your debts are a relatively low proportion of your annual income, so you're in good shape. Lenders are likely to be confident in your ability to repay them if they lend to you.

My debts are low, my credit limits are not.  They definitely mean debt, not limits.  Although of course they're telling me that having low debts is a good thing so *shrug*