Would downgrading my car (PCP) to reduce outgoings have a negative impact on mortgage application?

chasingfreedom

We are hoping to buy a house (using the new government guarantee scheme if possible) in the not too distant future. Currently we have quite high outgoings but a good income. In order to try and improve our affordability and make us look better to the lenders I was thinking it might be a good idea to change my car and get something cheaper. We are also clearing any debt we can to reduce our overall outgoings. I currently pay 347 a month PCP and on my credit file it shows outstanding balance of approx 24k. (I will never be keeping the car, I get a car allowance from work and have to change every 3 years)

If I was to return my current car and get something cheaper with a lower monthly payment would that help? Obviously the balance owed would be lower as well as the monthly amount. My dealer are happy for me to return the car and downgrade but said it would mean a new credit agreement which I assume means a credit search and new agreement on my credit file. Would the impact of that be worse than having a higher amount in my affordability?

K_S

@chasingfreedom Based on the limited information in your post, one hard-footprint credit search more than a month (the earliest 95% products aren't expected until mid-April) before a mortgage application is unlikely to have any material impact on your chances.

chasingfreedom

K_S said:

@chasingfreedom Based on the limited information in your post, one hard-footprint credit search more than a month (the earliest 95% products aren't expected until mid-April) before a mortgage application is unlikely to have any material impact on your chances.

Thanks K_S, I had read it impacts your credit score having a new 'account' on your file so wanted to double check. I think the reduced outgoing will benefit us more overall. I have one hard search on my file recently from a Natwest AIP but no other searches apart from that.

MWT

chasingfreedom said:

Thanks K_S, I had read it impacts your credit score having a new 'account' on your file so wanted to double check.

The credit score you see is not what the lenders use, so don't worry too much about that.

The lenders are more interested what is on your file, than a synthetic score which may react to things they do not care about.

chasingfreedom

MWT said:

chasingfreedom said:

Thanks K_S, I had read it impacts your credit score having a new 'account' on your file so wanted to double check.

The credit score you see is not what the lenders use, so don't worry too much about that.

The lenders are more interested what is on your file, than a synthetic score which may react to things they do not care about.

Thanks MWT, that's reassuring. If only we knew what their criteria was, would make life so much easier!

Thrugelmir

chasingfreedom said:

MWT said:

chasingfreedom said:

Thanks K_S, I had read it impacts your credit score having a new 'account' on your file so wanted to double check.

The credit score you see is not what the lenders use, so don't worry too much about that.

The lenders are more interested what is on your file, than a synthetic score which may react to things they do not care about.

Thanks MWT, that's reassuring. If only we knew what their criteria was, would make life so much easier!

Criteria can change overnight. Mortgage lending is fluid moving based around risk factors at the macro level. Imagine you are entering a beauty competition and wish to be selected ahead of other contestants. These are factors you can control at the micro level.