Question about Open credit - Mortgage related

GinG · 6 Aug 2009 at 16:09

When applying for a mortgage is it a good idea to close any credit cards etc etc you may have on file buy don't use, or to keep them open, same with overdrafts?

For example:

Using online banking I can instantly get:

£3,800 Overdraft
£5,500 Limit on Halifax Card
£5,500 Egg Card

Now would it be wise to max out the available credit limits, however not spend, showing I have x amount available however not used.

Or would it be best to have £0 overdrafts and to close all CC and to start from scratch?

Cheers

Dugganator · 6 Aug 2009 at 16:17

There is nothing wrong with having credit cards open with nothing on them as far as i'm aware.

Maxing out the card and then applying for a mortgage is the wrong thing to do.

Mortgages are all done on what you can afford against your out goings. If you have maxed out credit cards its going to go against you.

If you have a recent credit history which is all ok just keep the credit cards as low as possible until your mortgage is processed.

Knubje · 6 Aug 2009 at 16:30

I believe it is best if you spend a lot on them (all your monthly shizz) then pay it all off in one lump go at the end . Proves that you can handle your money and pay off bills, etc.

Having them, using them appropriatley and paying off the full amount/what is requested each month shows good discipline and that is what the lenders are really interested (if you can pay them back ritually, without a problem).

GinG · 6 Aug 2009 at 16:30

Duggan said:
There is nothing wrong with having credit cards open with nothing on them as far as i'm aware.

Maxing out the card and then applying for a mortgage is the wrong thing to do.

Mortgages are all done on what you can afford against your out goings. If you have maxed out credit cards its going to go against you.

If you have a recent credit history which is all ok just keep the credit cards as low as possible until your mortgage is processed.

Sorry I dont mean max out with spend, I mean get all the credit limits to the maximum I can get.

I.e. Currently have set Halifax CC limit to £100, I can however at a push of a button get the £5.5k (possibly more by ringing up)

Dugganator · 6 Aug 2009 at 16:46

limits don’t affect your credit status as such. With ratings its more done on have you been paying back what you spend. Also are you paying each month on time and not missing payments etc.

The best thing you can do is go to a credit rating website "Google time" and see how well you stack up.

They all deferrer between website but if your getting a good/excellent rating or the top 2 levels via points or colour then your be ok... as long as your earnings for the place your looking to buy are acceptable of course.

I just noticed you say your current limit is £100. How long is your credit history, has your limit always been set at that amount. If you haven’t had say a large amounts on your card that could go against your rating if you haven’t used them much(overtime of a few years say). Best bet is to get a report from the credit history reporting website that will give you a clear understanding.

GinG · 6 Aug 2009 at 17:08

Duggan said:
limits don’t affect your credit status as such. With ratings its more done on have you been paying back what you spend. Also are you paying each month on time and not missing payments etc.

The best thing you can do is go to a credit rating website "Google time" and see how well you stack up.

They all deferrer between website but if your getting a good/excellent rating or the top 2 levels via points or colour then your be ok... as long as your earnings for the place your looking to buy are acceptable of course.

I just noticed you say your current limit is £100. How long is your credit history, has your limit always been set at that amount. If you haven’t had say a large amounts on your card that could go against your rating if you haven’t used them much(overtime of a few years say). Best bet is to get a report from the credit history reporting website that will give you a clear understanding.

Thanks for that mate.

My credit limit is only set at £100, I have made my GF a second card holder and she is now using it for emergencies.

I did have it at £5,500 up until very recently.

I also heard, not sure if it is true, that if you can show you are saving the same/similar to your potential mortgage repayments this is also a good thing to do. I have been doing this for the past 4/5 months so hopefully when I come to look at getting a mortgage this will show well.

Basically looking to buy early next year, however trying to set as much in place as possible to help get a mortgage easy!

I am 23 so had open credit for 5 years.

Dugganator · 6 Aug 2009 at 19:31

Not all lender will take proof of saving as postive proof you can afford a mortgage but if you are saving this money I would suggest using this towards your deposit. Lenders love deposits, the bigger the better simply because it lowers the risk there end and it improves the chances your get a mortgage.

Also it will lower your repayments. Also remember when you move into a place you have to pay bill, council tax, home insurance etc etc. If i was you I would start saving this money also if you can. a lot of people trip up when they first move out not know how much everything costs. But your doing the right things so far.

The best piece of advise to anyone looking to buy is just save save save. The bigger the deposit the better.

Also you say your 23 and had a credit rating the last 5 years well just to give you a picture i was 21 when i got my mortgage and I had a good rating then not the best but the best for my age at the time if that makes sense.