Mortgage Prep Question for Credit Limit

mike3231

Hi,

I have 4 forms of credit at the moment. An Argos card (£1000), PayPal Credit (£1600), an older Barclaycard balance transfer credit card (£1200) and a newer MBNA balance transfer credit card. (£3200). I only use around 30% of that total credit which is solely on the MBNA balance transfer card. I have around 16 months to pay this off within the low interest period.

I am saving for my first house with my partner and we are at a point where we are almost ready, we have £20,000 in total saved in our individual Lifetime ISAs. This is a 10% deposit for a £200K house so we are almost at a point where we can start viewing properties if any suitable were to become available in our area of choice.

Although my credit rating is "Good" - I am concerned that my credit file may cause some issues with getting a mortgage and wouldn't want to add any additional delay after me and my partner have worked so hard to save a deposit over the last 2 years.  

Will closing my unused credit sources (such as PayPal and the older Barclaycard) help improve my credit rating? Or will it make it worse because the 30% used credit will shoot up to around 50%. Although, I don't have anything on my Argos card at the moment, it is quite useful to have if I need something urgently on a Buy Now Pay Later plan. 

Should I pay off the debt first and close the unused accounts later? Or can I close the unused and pay off the remaining debt.

If I don't save anything extra towards the deposit, I can pay off the credit card debt in around 2/3 months. Then everything else saved is soley on deposit money.

Thanks,

Mike

[Deleted User]

Your limits are very low. Keep all the accounts.

Make sure your debt is cleared before you apply for a mortgage.

Disregard your 'Good' credit rating. Each lender will make their decisions on your credit worthiness when you apply.

[Deleted User]

Don't close the accounts as this will affect credit utilisation. I've just had my mortgage offer off natwest. 10% deposit. I have £8000 credit over 2 credit cards with a balance of £3000 which is nearly 50%, about a year ago I closed a credit card and it made my credit score drop for a few months. 

2021BJ

C1992 said:

Don't close the accounts as this will affect credit utilisation. I've just had my mortgage offer off natwest. 10% deposit. I have £8000 credit over 2 credit cards with a balance of £3000 which is nearly 50%, about a year ago I closed a credit card and it made my credit score drop for a few months. 

Are those paid off in full or are you carrying the balance month to month?  If the latter I'm surprised that the offer doesn't specify paying off the cards.  Although if it doesn't that probably means the offer has been reduced to take into account the balance you're carrying.

Utilisation is irrelevant if you're paying off in full.

I once ate a banana and my score dropped by 3 points the next day. I haven't eaten once since and my score hasn't dropped.  True story.

[Deleted User]

2021BJ said:

C1992 said:

Don't close the accounts as this will affect credit utilisation. I've just had my mortgage offer off natwest. 10% deposit. I have £8000 credit over 2 credit cards with a balance of £3000 which is nearly 50%, about a year ago I closed a credit card and it made my credit score drop for a few months. 

Are those paid off in full or are you carrying the balance month to month?  If the latter I'm surprised that the offer doesn't specify paying off the cards.  Although if it doesn't that probably means the offer has been reduced to take into account the balance you're carrying.

Utilisation is irrelevant if you're paying off in full.

I once ate a banana and my score dropped by 3 points the next day. I haven't eaten once since and my score hasn't dropped.  True story.

No my minimum payment is around £30pm. I pay £100pm and its on 0% balance, I don't spend on it. Sorry but credit utilisation does have a part to play, I used to work at a bank and know its a behaviour that lenders can look at it. Sorry...

2021BJ

C1992 said:

2021BJ said:

C1992 said:

Don't close the accounts as this will affect credit utilisation. I've just had my mortgage offer off natwest. 10% deposit. I have £8000 credit over 2 credit cards with a balance of £3000 which is nearly 50%, about a year ago I closed a credit card and it made my credit score drop for a few months. 

Are those paid off in full or are you carrying the balance month to month?  If the latter I'm surprised that the offer doesn't specify paying off the cards.  Although if it doesn't that probably means the offer has been reduced to take into account the balance you're carrying.

Utilisation is irrelevant if you're paying off in full.

I once ate a banana and my score dropped by 3 points the next day. I haven't eaten once since and my score hasn't dropped.  True story.

No my minimum payment is around £30pm. I pay £100pm and its on 0% balance, I don't spend on it. Sorry but credit utilisation does have a part to play, I used to work at a bank and know its a behaviour that lenders can look at it. Sorry...

So did I.

If you're paying it off in full, the utilisation doesn't matter.