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Will it be okay for me to cancel this credit card?

(5 Posts)
SpangledBoots Sat 21-Jan-17 18:15:44

For the past year I've been getting on track with money which feels great but I have some credit card debt I'm working through. I have this on a card with a £3,800 limit. It's interest free on balances and purchases until July 2018. The current balance is £2,900. I use the card for purchases but immediately pay that off and each month I reduce the overall balance with the view to completely clearing it next year.

I transferred this balance from an older credit card which has a £5,000 limit with nothing interest free. I don't use this card at all so think I should close it.

The only thing holding me back is that I've read in several places (MSE etc.) that mortgage providers look at the balances of credit compared with the limit available to you and they prefer that less than 1/3rd is in use.

I'm planning to look at mortgages later this year so will still have more than 1/3rd of my current credit card balance in use but my overall use of credit versus available credit is less than 1/3. How important is this consideration versus looking like I have too much available credit?

Thanks in advance!

1000hobnobs Sat 21-Jan-17 18:44:53

Cancel the credit card if it's paid off and you don't need it. Your outstanding balance on the other card will reduce the amount you can borrow for a mortgage though and potentially by quite a lot. If for example you owe £3k on a credit card that doesn't mean you can borrow £3k less, it might be more like £10k less.

SpangledBoots Sat 21-Jan-17 19:02:29

Is that reduction reflected in the overall amount I could borrow based on my salary or based on the cost of the property? I.e. if i need for £110k for a property but could borrow up to £150k based on salary, will I only be offered £100k or would I be ok?

lionsleepstonight Wed 25-Jan-17 21:46:47

It comes off your salary.

delilahbucket Sun 29-Jan-17 10:13:24

You wont be able to borrow more than the value of the house regardless of your salary or outgoings. You will require as a bare minimum a 5% deposit but the bigger the deposit the better the mortgage deal you will get.
The credit card that is not being used won't affect getting a mortgage much, I have several and it didn't come into consideration with my mortgage. The balance outstanding will though. If you will be tight on how much you can borrow versus your income, you need to get that card paid off.
You can get a rough idea of how much you can borrow using online calculators. Money saving expert have one but it does not take into consideration any debt. Some of the banks calculators do.

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