To apply for a credit card when I want a mortgage

[Bigmacpup]

I don’t have any credit cards and never have. However I would like one with a small limit to make purchases on and then pay it off at the end of the month. I’m going away with work soon and having a credit card would be useful as I have to pay upfront for expenses and then claim them back after the trip. It would also help build up my credit rating (which is pretty good anyway).

I am planning to buy my first house soon. I’m actively looking for houses and have made a couple of offers but they haven’t worked out so far. There’s currently not much on the market that meets my criteria so I don’t know how imminent a mortgage is. Is it a bad idea to apply for a credit card at this stage? I don’t want to negatively affect my chances of getting a decent mortgage. How long should there be between getting a credit card and getting a mortgage?

This looks like it might be helpful, hopefully.

www.forbes.com/advisor/credit-cards/how-do-credit-cards-impact-your-mortgage-application/#:~:text=New%20credit%20only%20impacts%2010,shopping%20for%20a%20new%20home.

This too, although the article is 3 years old.

www.experian.com/blogs/ask-experian/will-new-credit-card-affect-mortgage-application/

As long as you’re making the payments against the card on time and not missing them there’s no issue.

It's something that's recommended if you don't have much in the way of credit history that demonstrates that you've borrowed money and paid it back on time.

You're right that it would be useful for work expenses and if you have these regularly (doesn't necessarily need to be every month, even every 2-3 months would be enough to keep the card active) you wouldn't need to use it for anything else if you don't want to, although it is useful for the extra protection that use of a credit card brings, so you might want to use it for things like holidays and large purchases/white goods etc.

However, you don't necessarily want a small limit as counter-intuitively, the percentage of the limit used is one of the factors lenders use to determine whether you're using the card responsibly (eg it looks better if you spend £400 on a card with a £2000 limit than it does if you spend £200 on a card with a £250 limit as in the latter case, it looks like you're sailing close to the wind).

So if you get asked during the application process what limit you want, ask for something that will comfortably exceed your anticipated work expenses by a decent margin (probably at least £2k would be a good starting point). Then any purchases of a few hundred pounds will be a small percentage of the limit. Other important point to note would be to set up a direct debit to pay off the full balance every month so there's no chance of forgetting to pay it off.

A single application won't be detrimental to your mortgage application, it's when you make 2-3 applications in a short period of time that it looks like your finances are problematic.

That’s not true. Having a credit card may reduce her borrowing capacity.

I buy everything on my credit card and pay it off in full each month. I have a perfect credit rating. You need credit to improve your score.

The application for the card will temporarily impact your credit score negatively. Paying it off in full each month will be positive for your credit score. If you’re serious about buying you need to have arranged your mortgage and finances in advance as you’re unlikely to get an offer on a house accepted without having a mortgage offer in place.

A year before buying a house I got a credit card and paid it off in full every month, my credit score was the highest it could be and I'm sure helped with my very easy mortgage application.

In case this helps:
We chose a Tesco credit card that earns us club card points every time we use it, not just at Tesco, and the regular Tesco club card points are on top when you do shop at Tesco. We use the credit card for everything and pay it off each month. (Direct debit set up so we can't forget to pay it). We have made so much money on club card points over the years, although we are very disciplined spenders.
This isn't an advert for Tesco bank at all, just saying there are cards out there that can work for you beyond helping with your credit limit. Definitely worth the research, even a separate MN thread to find one that works for you.

I agree with PP about having a higher credit limit - again, as long as you are a disciplined spender and not like one of my friends who saw her credit limit as hers to max out each month.

This.

A higher limit on a card could reduce what your mortgage company will then lend you.

They look at total credit available when making their calculations.

Go on. Money Advice website such as Money Saving Expert and get opinions from a site aimed at money rather than a AIBU for mum's.

You can’t get a mortgage offer until you’ve had an offer accepted on a property so ignore this OP.
it’s fine if you pay it off in full each month. We got a large car loan the month before we applied for a large mortgage, no issues at all we just had to declare it, and we both use credit cards and continued throughout the house buying process

Not true. Finances first then look for a house. I’ve even been asked for proof of mortgage offer from an estate agent before being allowed to view a house as vendor didn’t want any time wasters. Vendors want you to be in a position to proceed.

This is absolutely not true. You should have a mortgage in principle agreed before looking for a house.

I’ve always had credit cards, always stayed within my limits and all repayments on time, I’ve never had any issues getting a mortgage and have a near perfect credit rating, so it’s true for me.

How long do you think there should be between applying for a credit card and applying for a mortgage?