Some advise please

Federal_debtfree

Hi, 

New to the forum, over the past 2 years starting to finally do something with my old debt. Credit score not great but in 3 years time I would like a mortgage. 

I have paid about 30k off on debt in the last 2 years so everything that has defaults is either part settled or cleared. 

I have 3 credit builder credit cards which I spend a lot on but clear each month with limits of 

£300
£1200 
£800

I have a car loan which finishes in August and also 2 phone bills through EE and O2 and have not missed any payments for at least a year. 

Recently I was offered 2 loans, one at 2500 and one for 5000 I didn't really need it but took them and I was aware initially it will affect my credit score but the time it is cleared in 3 years I am hoping it has significantly improved my credit score. 

My question really is, will the 3 credit cards and loans being credit builder loan/cc will they actually help my credit score towards getting a mortgage or actually hinder? If they will hinder I will pay them off over the next 6 months and clear them. All defaults are due to end in August 2024. I just want to make sure that by the time it comes to getting a mortgage I am in the right position. 

Any advise would be great. 

Thanks in advance. 

sourcrates

Never take out borrowing to supposedly improve your mythical credit score, that`s not good financial planning.

You don`t have a credit score in this country, despite the amount of advertising that says differently.

The number given to you by various CRA`s is only seen by you, and is not to be taken as a true status of your credit worthiness, it duck`s, dive`s, and goes up and down, with change of any kind.

Credit history is what is important, a long history of repaying on time, sticking to credit limits, not paying late or defaulting, just normal basic stuff.

You are assessed by a lenders own credit scoring system, all are confidential, all are different, so don`t be obsessed with the score, concentrate on the history.

Federal_debtfree

Never take out borrowing to supposedly improve your mythical credit score, that`s not good financial planning.

You don`t have a credit score in this country, despite the amount of advertising that says differently.

The number given to you by various CRA`s is only seen by you, and is not to be taken as a true status of your credit worthiness, it duck`s, dive`s, and goes up and down, with change of any kind.

Credit history is what is important, a long history of repaying on time, sticking to credit limits, not paying late or defaulting, just normal basic stuff.

You are assessed by a lenders own credit scoring system, all are confidential, all are different, so don`t be obsessed with the score, concentrate on the history.

Thanks for the reply, do you think If I pay the loans for the next 3 years and clear it then it will improve the chances of my mortgage? Or do they only see active debt? 

Also what do you think about the 3 credit cards, keep them and use maybe 100 on each per month and clear or get rid of them?

Its a catch 22 as you said, I need to show that I can pay my bills on time but on the other hand I need to have them to show mortgage lenders I will pay. 

Federal_debtfree

sourcrates said:

Never take out borrowing to supposedly improve your mythical credit score, that`s not good financial planning.

You don`t have a credit score in this country, despite the amount of advertising that says differently.

The number given to you by various CRA`s is only seen by you, and is not to be taken as a true status of your credit worthiness, it duck`s, dive`s, and goes up and down, with change of any kind.

Credit history is what is important, a long history of repaying on time, sticking to credit limits, not paying late or defaulting, just normal basic stuff.

You are assessed by a lenders own credit scoring system, all are confidential, all are different, so don`t be obsessed with the score, concentrate on the history.

I do agree on your advise about the credit score though, no missed payments in a year, on the voters roll no court judgements and still a poor score. 

I am just hoping soon that a good credit card lender will give me a card so I can get rid of the bad credit cards as I am guessing they dont look good?

MalMonroe

Hi, as ever, sourcrates' advice is excellent. Do listen. 

This sentence, in particular "Credit history is what is important, a long history of repaying on time, sticking to credit limits, not paying late or defaulting, just normal basic stuff."

Nobody except you ever sees your credit score. If lenders think you have over-reached with your borrowing they will not want to consider you for more lending. Credit scores are just for your personal information and/or guidance and lenders never know them.

Lenders don't like it if you use more than 50% of your available credit but they do like it when you pay off more than the minimum payments. 

If you pay off the loans early will you be penalised? If not, I'd get on with getting rid of them as quickly as possible. (It really is crazy to accept loans that you neither want nor need.)(I speak from experience here.)

If I were you I'd not apply for any more credit yet, in any form. You will just look 'credit hungry' and again, lenders don't like it.

You could close two 'bad' credit cards (how bad are they?!) and just keep the one with the highest limit for general spending that you clear every month. 

You've said of your debts "If they will hinder I will pay them off over the next 6 months and clear them." But if you can afford to pay them off in the next six months, why not do that?  You need to be able to prove to lenders that you are able to manage your money effectively and well. For example, don't keep money in savings or to one side if you could clear debt with it. I would definitely clear debt with it, after checking out whether there will be any penalties, of course.

[Deleted User]

Federal_debtfree said:

sourcrates said:

Never take out borrowing to supposedly improve your mythical credit score, that`s not good financial planning.

You don`t have a credit score in this country, despite the amount of advertising that says differently.

The number given to you by various CRA`s is only seen by you, and is not to be taken as a true status of your credit worthiness, it duck`s, dive`s, and goes up and down, with change of any kind.

Credit history is what is important, a long history of repaying on time, sticking to credit limits, not paying late or defaulting, just normal basic stuff.

You are assessed by a lenders own credit scoring system, all are confidential, all are different, so don`t be obsessed with the score, concentrate on the history.

I do agree on your advise about the credit score though, no missed payments in a year, on the voters roll no court judgements and still a poor score. 

I am just hoping soon that a good credit card lender will give me a card so I can get rid of the bad credit cards as I am guessing they dont look good?

Lenders don't see the brand of card, just that you are borrowing and paying off in full every month. Pay off the loans (if you didn't need them presumably you still have the money to clear them?). If anything, it's better to keep older cards as it shows stability, so long as you don't carry any balance. If you just spend and pay off in full every month, clear the loan and don't mess up on any debt, in 3 years your credit history will look much better when the lender scores you using their own internal systems, particularly as the older debt will be close to dropping off

TBagpuss

I agree. Pay off the loan, clear the credit cards each month, and assuming that you have no other debt, start to put funds away each month to build savings.