Split Tariff Contract on Mobile Phone AKA Unsecured Loan

MayflowerBuyer

I entered a Split Tariff contract with O2 in January 2021 and consequently the cost of the handset shows as an 'unsecured loan' on my credit report. I am looking to buy a house sometime in 2022. Will it improve my position in terms of credit score/chances of a better mortgage agreement if I pay it off in full prior to applying for a mortgage? 

Ebe_Scrooge

When you apply for a mortgage (or any form of credit), the lender will take into account any outstanding debts you currently have,  So yes, paying off the loan will make you look better in their eyes.  However, I'm not sure whether it would make any material difference to be honest - I'm assuming the loan is for quite a small amount, just a few hundred pounds?  If so, then it's pretty insignificant compared to the (presumably) tens of thousands you'll be borrowing on a mortgage, and probably won't make any real difference.  Of course, if you're paying interest on the loan then it's worth paying off if you can, just to save paying the interest.

Be aware, if you do pay it off, your credit score will drop - the scores drop in response to any change in your credit circumstances, whether good or bad.  But the score is only seen by you, and plays no part in any lending decisions.