Best to pay off credit card or some direct debits for mortgage approval

Zaox

Hi

We have a £9k in credit card debt on one card and a few direct debits for a bed, hot tub etc. 

I can pay off all the direct debits and make myself around £700 a month better off or pay off the credit card and be £300 a month better off.

Is it better to have more disposable income to be approved and less direct debits or to pay off the credit card?

Which do they look at as worse?

Note, we have a 999 out of 999 credit rating on experian.

Thank you

grumbler

Zaox said:     

                     
Is it better to have more disposable income to be approved and less direct debits or to pay off the credit card?

Is it not the same? The less debts you have, the less money you need every month to service the debt and the more disposable income you have.

Also, I think, it's more correct to say that you have debts that you are paying off by monthly 'direct debits'. And these debts are essentially no different from your CC debt. The less total debt you have, the better for a mortgage application. And, unless your  £10K+ debt is at 0%, IMHO it's a worring fact for any mortgage lender. It's just silly to pay interest on debts if you can clear them and if the interest you pay is higher than the interest you can get on savings.
And you can safely ignore the meaningless 'score' that you see at CRAs, although it does reflect the fact that you have been repaying your debts faultlessly.

MWT

grumbler said:

... And, unless your  £10K+ debt is at 0%, IMHO it's a worring fact for any mortgage lender.

Even if it is on a 0% deal most lenders will still have a concern and will reduce affordability based on the minimum payment, say 3% per month. 

I would talk to a broker though and take advice from them.

RelievedSheff

Lenders will view both debts as the same. They are a monthly commitment that will reduce your affordability.

The less debt you have then the better your affordability. 

amnblog

It may not matter either way depending on your affordability calculations. Speak to a mortgage broker.

Hoenir

From a money saving perspective why pay interest on borrowed money if you've no need to. 

jimjames

Hoenir said:

From a money saving perspective why pay interest on borrowed money if you've no need to. 

Absolutely. The priority should be to pay off the debts that charge the highest rates of interest rather than whatever method of payment is used to cover them.

Zaox

ok so basically it makes no difference whether it's credit card debt or direct debits for items. The key is disposable income.

penners324

Zaox said:

ok so basically it makes no difference whether it's credit card debt or direct debits for items. The key is disposable income.

The key is as little debt as possible 

fergie_

When you say direct debit, is it a loan? Or more like a recurring payment for a rental?

The general rule is to pay off the highest interest bearing debts first, but sometimes it can be beneficial to keep disposable income or to focus on a debt that is about to jump up in rate.