Optimal credit utilisation on 0% card

ChewyyBacca

Hi All,
I have multiple cards with 0% offers for 2 years. I plan to apply for mortgage late this year/early next year.
I was wondering if there is a magic number for credit limit utilisation?
Is 80% or 90% or even 99% is okay and future lender wont frown at me.
Currently paying monthly due on them all.

cymruchris

ChewyyBacca said:

Hi All,
I have multiple cards with 0% offers for 2 years. I plan to apply for mortgage late this year/early next year.
I was wondering if there is a magic number for credit limit utilisation?
Is 80% or 90% or even 99% is okay and future lender wont frown at me.
Currently paying monthly due on them all.

Different lenders will have different views as to what's 'good' and 'bad'. It's better with a mortgage application to have less debt if possible - so I'd probably try to get the balances down over the next year before the mortgage is applied for.

Any 0% offer does have a flag on your credit report for 'promotional rate' - so they'll know that you're not paying full interest - but as I say, the level of debt to income will be a 'good' or 'bad' thing to different lenders, there's no universal answer.

Have you had a good look over your finances in recent months to see if you're on the best deals you can be on for things like phones and broadband? Do you have any services you can downgrade or suspend? It may be you've already had a critical look at everything - but if you're on the road to a mortgage now's as good as time as any to do what you can to save!

Brie

Using a deal might trigger some reaction but in my experience it's the fact that you have all this credit available that will be the issue - whether it's being used or not.  They will take that in to account when they decide how affordable the mortgage is.  So it will be mortgage+credit available on card1,2,3,etc versus income available to pay all of these back.  Just because you are not using the credit available doesn't mean you won't go out and spend or transfer or whatever the day after the mortgage deal is finalised.  

ChewyyBacca

cymruchris said:

ChewyyBacca said:

Hi All,
I have multiple cards with 0% offers for 2 years. I plan to apply for mortgage late this year/early next year.
I was wondering if there is a magic number for credit limit utilisation?
Is 80% or 90% or even 99% is okay and future lender wont frown at me.
Currently paying monthly due on them all.

Different lenders will have different views as to what's 'good' and 'bad'. It's better with a mortgage application to have less debt if possible - so I'd probably try to get the balances down over the next year before the mortgage is applied for.

Any 0% offer does have a flag on your credit report for 'promotional rate' - so they'll know that you're not paying full interest - but as I say, the level of debt to income will be a 'good' or 'bad' thing to different lenders, there's no universal answer.

Have you had a good look over your finances in recent months to see if you're on the best deals you can be on for things like phones and broadband? Do you have any services you can downgrade or suspend? It may be you've already had a critical look at everything - but if you're on the road to a mortgage now's as good as time as any to do what you can to save!

Thanks cymruchris & Brie for your inputs

The 0% rate finishes in Feb 2025 on 2 cards & in June 2024 on 1 card . My current credit utilisation is 96% on both the cards & on 3rd card 10%, which i will pay off next month. All the money is invested at 5.2% to 5.56% in savings account.
I plan to clear all the due 3 months before applying for Mortgage. I have planned for cash flow from August 2024.

Finances are in decent shape. Broadband deal £25 pm is ending in July 24 & I'm wondering what to do, all available deals are fixed contract for 18 months & if I have to move i will be stuck in the contract.

All subscriptions/ services suspended since last 2 years, realised we don't really need all of them. Frugal living has become way of life now. Phone & BB contract is one of the cheapest on the market. Car is fully paid for. Anything else I need to look at?

Based on what Brie has suggested, isn't the available credit limit indicative of my payment capacity as assessed by lender? 
On that note, I was planning to get another 23-27 months 0% promotional card in April/May 2024, so that I have breathing space for essential new home deco expenses. Should I not apply for one, given there will be minimum 6 months gap between credit check for credit card application & mortgage application?

daivid

What is at stake with the mortgage application? If it's for a house purchase and the mortgage falling through risks losing the house and money spent on surveys etc I'd be very conservative. For a remortgage to a better rate I'd be looking at the risk and reward. In the past I've been happy to risk carrying a stooze pot through re-mortgaging, though when my current deal is nearing the end I may be more cautious with SVR as they are.

Nasqueron

Credit utilisation is one of these silly CRA gimmicks that relate to the fake score

Any lender is going to look at your income, your existing debt and how much you want to borrow and thus whether it's affordable. If you are comfortably able to make repayments to clear the debts in time and want to borrow a relatively small amount vs income, it's more likely to go ahead. If they think your existing debt is high and your ideal mortgage is at the high end of affordability then they may offer less.

On the last point - you were "planning" on getting a card to give you more breathing space - what is your plan when you don't get a card given the existing debt  (lenders don't look at savings as they could be blown in a second)?

ChewyyBacca

Thanks for the perspective Nasqueron

I will use the credit card acceptance tool & apply the one which shows me pre approved
In case there isnt any suitable one for me, we will survive, though it will be tight with all the savings gone toward deposit & income towards repaymwnts