Credit Card debt when it comes to mortgages - Covid

reeceg353

Hi All,

I was hoping you could help, I currently own a house on my own but am looking to buy a new house in around a years time with my girlfriend. My job is quite heavily centred around commission, or at least half of my salary is. During Covid our commission had taken quite a whack and this past year I think i've earned around half of what I did the previous year. I don't want to get into the deep reasons, I know that I shouldn't rack up credit card debt, but I did.

Having said that, I will be in a position to pay off the credit card debt, bit by bit, by 12 months time (currently at £10k).

My question is, when it comes to applying for a mortgage, does the lender look back at this borrowing and put it against me? Or if I have completely wiped off the credit cards the month before I apply for a mortgage, do they overlook it because technically the debt is now £0 and my monthly repayments will also be nill?

Any help is much appreciated!

K_S

@reeceg353 If, by the time of application you have cleared the debt and it reflects on your credit reports, there should be no material lasting impact of the prior debt levels.

reeceg353

Ok that's great news.
Thanks!

ACG

Sometimes it can take a while for your credit reports to reflect the updated balance. If you were to clear it off a month before, it may still be showing when the lender does their credit check. But if you are bringing the balance down by say £800 per month, then worst case scenario is they will say £800-1600 on the cards. 

For all but 2-3 lenders you can tick a box to say those credit cards will be cleared and they will ignore the debt completely. 

They wont worry that your balances were £10k, they are more concerned about what they are like closer to the time of application. Having a lot of debt in itself is not a deal breaker providing you are making the payments on time.