Credit Card Balances on Mortgage Application

mpa91

A question I have never been able to find a straight answer to...
I use credit cards for most of my everyday spending, which results in a statement balance of c.£2k on average each month. I clear the balance in full each month without fail. When it comes to completing a mortgage application, what should I be putting against credit cards? In years gone by I’ve been told by some it should be £0, and others that it should be my current balance as at the day of my application. Is anyone able to provide a definitive view?

[Deleted User]

Zero.

You're simply using your credit card instead of your debit card.

ACG

I would put a balance on there as chances are it will pick up some balance - maybe £1,000. But then just tick the box to say it will be cleared by completion. 

Rachlou_25

I had the same thing with my recent application. I didn’t declare a credit card balance to my broker as I clear it every month, just use it for bits and bobs but he saw the payments in my bank statement and let the lender know that a credit arrangement is in place.  He didn’t ask me about it but just said it would be paid in full by the time of completion.  

My mortgage offer was subject to clearing some or all of the credit commitments listed in the application.

hopeitwill

It also probably depends on affordability and how much you would want to borrow, but I am on the side of caution and add them into the application and if I believe I could pay it off, I would tick that box. Not sure if lenders are able to see your credit commitments or the balances on them when they do a hard search but if they are, then it would be better to add them with a note that it will be paid off.

moxxey

Deleted_User said:

Zero.

You're simply using your credit card instead of your debit card.

This is very incorrect feedback.

Your card balance makes a big difference to your mortgage offer, even if you pay it off in full. For example, if you put £1000 on your card and pay it off, but it shows as 'balance: £1000' on your credit file, the underwriter is likely to view this as an over-reliance on credit, even if you do, like me, use your credit card instead of a debit (I tend to use my AMEX everywhere!).

I learned this the hard way. I put way too much on my AMEX, even though I pay it off in full. The underwriter viewed this as putting extra stress on the ability to pay back the mortgage later, if interest rates rise, so it massively reduced the amount they would lend.

[Deleted User]

moxxey said:

Deleted_User said:

Zero.

You're simply using your credit card instead of your debit card.

For example, if you put £1000 on your card and pay it off, but it shows as 'balance: £1000' on your credit file, the underwriter is likely to view this as an over-reliance on credit

That is a very incorrect assumption.

You may not be aware that we are able to see that balances are paid off in full each month and in general, that is not viewed as any kind of reliance on credit.  

Lenders obviously vary in their interpretation, but non-revolving balances are generally understood for what they are.

ACG

Its not a case of seeing £1k on a CC and it being an over reliance, most people have at least £1k of debt (overdraft, credit card, catalogue, loan etc). It is more a case that when they do the credit check are they going to see a credit card with a balance on or not? Chances are if you are running up £2k over the course of the month, there will be a balance on your credit report. 

If you put £0 and they pick up £500/1000/1500/2000 every month, they may question why it is £0. Ultimately putting £0 probably wont alter the outcome but it may cause a bit of a delay whilst the underwriter asks the question. 

I suppose the best advice would be to check with your specific lender. But I know in the main I would either put a balance or put £0 and then put a note on the application. 

Thrugelmir

Deleted_User said:

Zero.

You're simply using your credit card instead of your debit card.

Unless you've the savings to cover the debt. You'll be clearing some of the monthly balance in arrears with the following months pay. 

Gem_M90

My situation is undoubtedly entirely different to yourself, however if it's in anyway helpful I had cleared a balance on a card prior to my mortgage application however it had still been showing on my credit report. My broker didn't declare this balance as I'd cleared it, and he didn't bother his backside to check my report it seems, however my application went to underwriting and they declined it within days for undeclared credit. I then had to send the proof to them for this particular balance, after which they reinstated the offer. 
Always best to declare whatever is showing on your file at that time to save the hassle.