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Original poster

Mortgage application and available credit

30 replies

PancakeInMaBelly · 03/02/2018 21:11

Hi
I keep reading that you're best closing your CC accounts or at least reducing the balance as AVAILABLE credit is a negative for mortgage lenders incase you spend it thus changing your affordability

But I want to keep my paid off CCs for emergencies/unforseen circumstances

How much available credit is acceptable, what is a rough threshold?

I have about £10K available on CCs (smaller amts spread across a few accounts)

Thanks

OP posts:
TinaMena · 03/02/2018 23:57

Are you up to date with payments? As long as you have no history of late payments you should be ok. Depends how many cards you have open - it might be worth closing some accounts if you have a few

HarrietSchulenberg · 04/02/2018 00:04

Try not to have more than a couple of K available credit. £10k would be one hell of an emergency.

Original poster
PancakeInMaBelly · 04/02/2018 00:11

"As long as you have no history of late payments you should be ok"
This is not what I'm asking at all. There are no payments on paid off CCs.
I know I will get a mortgage, but I want to get the best deal I can without losing one of my safety net

I keep hearing/being told that lenders want you to close paid off credit cards so that you don't have available credit, and thus the POTENTIAL to increase your debt.

But the specifics are never mentioned

What kind of threshold becomes a problem?

I'm sure they wouldn't consider £1,000 an extra risk to affordability. Having £50K available credit is probably an issue. But where do I stand with 10k available credit & a 50k household income.

Brokers telling us to close all paid off cards, but this is their generic advise, and doesn't think beyond the mortgage IYKWIM.

Until my savings lot is bigger I want to keep as much credit as possible available incase something unexpected happens.

OP posts:
Original poster
PancakeInMaBelly · 04/02/2018 00:13

"£10k would be one hell of an emergency."

Not really
Some unexpected catastrophes drag on for a few months....

OP posts:
Original poster
PancakeInMaBelly · 04/02/2018 00:19

Also, some of my larger limits are on extremely low AND cards (long term, not temp deals) and if I closed them now I might not necessarily ever get such a good deal I the future, should I need credit.

If 10k is too much I'll suck it up and close some for the same of a preferential mortgage deal, but how much, in actual figures, can I keep before it significantly negatively affects my deal?

No other loans/credit commitments/car finance etc. I just like to have the cards there, I don't even keep them in my wallet they're just for emergencies

OP posts:
WhatShallIDoWithMyself · 04/02/2018 00:22

I've never heard of this personally. I have c40k of available credit (cards I've kept open over the years, never bothered to say anything when they increase limits). Pay off in full every month.
I don't see why it would be a problem - it shows you're capable of resisting that available credit, and there's nothing to stop you getting a new card straight after getting the mortgage and then defaulting on the card.

Original poster
PancakeInMaBelly · 04/02/2018 00:33

"And there's nothing to stop you getting a new card straight after getting the mortgage and then defaulting on the card. ".

Well that's not really true is it. If the SHTF and you need CCs to get you through a tough couple of months, those are not the sorts of times in your life when you're going to be given NEW credit is it? This is why I want to keep them and also the reason why lenders might frown upon them.

OP posts:
Original poster
PancakeInMaBelly · 04/02/2018 00:41

I see their point, the months after buying a new home are probably high risk for people who have a tendency to go on spending sprees if they have credit stuffing there.

But I'm not like that and I don't want to outright ignore the brokers advise, but also wanna keep as much as I can IYKWIM. They're saying close ALL paid off CCs. I'm thinking that the actual lenders will have a threshold that's acceptable to them, and I'm trying to work out what that might be.

OP posts:
DuckBilledAardvark · 04/02/2018 00:50

I'm sure £1k available in ten different cards would look worse than one card with a £10k limit.

I have a credit card with a limit of £1500 for short term emergencies and then savings of x5 my monthly salary.

Original poster
PancakeInMaBelly · 04/02/2018 00:54

It's not ten. It's 5. Biggest limit 4k, smallest £1200. Others are in between.

I aim to build up more savings so I won't need then as a back up. Which I am doing my savings are increasing steadily, but not quite there in terms of having enough of a safety net to close the cards.

I don't actually think 10k is a lot at all in an emergency: legal fees, private medical treatment, sudden death of a relative with no funeral arrangements etc..

OP posts:
hadthesnip · 04/02/2018 01:11

I am a financial advisor & have been arranging mortgages for over 20 years. I can say that your available credit limit, or even your actual credit limit is of no concern to any lender. They will do a credit search which mainly tells them who you have credit with (HP, Loans, Credit cards, Store cards etc) and if you have missed any payments over the past 2 years. The amount you have outstanding on credit & your monthly payments are the 2 things they take into consideration when calculating the affordability & ultimately how much they are willing to lend you.

I hope this puts your mind at rest.

Original poster
PancakeInMaBelly · 04/02/2018 01:16

Thanks hadthesnip
My brokers are saying my CCs should be paid off AND CLOSED, not just paid off and sitting there. But I don't actually think that 10k available is much with a 50k household income. My credit rating is very good. I think that I can be trusted to have instant access to 10k since I haven't got a track record of blowing it all.

Glad that your experience in the field agrees!

OP posts:
Shen0102 · 04/02/2018 01:33

I thought closing a credit card instantly would put a negative effect on your credit card rating ?

look into it more before making a hasty decision

Original poster
PancakeInMaBelly · 04/02/2018 01:37

Interesting Shen. I've only ever heard the opposite, and not just from my broker but obviously they're the ones I'm most concerned about.

OP posts:
Desmondo2016 · 04/02/2018 13:49

I would keep the 4k one and close the rest. Although they take 3 months to fully close in case of pending payments to the card. I agree with your broker. Unnecessary available credit could be detrimental to a mortgage app. And I think 4k would be ample for a what if situation. Any more than that and you could end up in a debt spiral.

Original poster
PancakeInMaBelly · 04/02/2018 14:25

The 4k one isn't the best APR.
If I'm closing 6k worth it surely makes sense to chose by APR which would leave me with 3 smaller ones which are really low APRs.

OP posts:
hadthesnip · 04/02/2018 14:46

If you can do a c/c transfer & transfer the balance(s) onto 1 card, or onto any that are paying 0% then that is the better solution. As I said earlier, I have never been told that lenders look at what c/cards you have open and if they are "empty". Lenders are primarily concerned with if you can meet the monthly repayments on all your debts and the Bank of England have recently made the banks to build in factors such as interest rate rises & redundancy periods. I assure you, as long as you declare the amount outstanding on your c/cards & the amount you pay every month then they will not be concerned if you have 2 or 3 which are "open" but have no balance on them.

TinaMena · 04/02/2018 17:45

If I'm closing 6k worth it surely makes sense to chose by APR
If you're only keeping one for an emergency, then surely ut doesn't matter, as you're unlikely to need it? Keep the one with the highest credit limit in case you have an expensive emergency

Original poster
PancakeInMaBelly · 04/02/2018 20:03

Of course it would matter! The type of emergency that would see me dipping into credit cards would be the type of emergencies where I wouldn't be in a great position to afford high interest repayments!!

OP posts:
Desmondo2016 · 04/02/2018 22:06

I think if I was your mortgage advisor I'd be more interested as to why you were so concerned about a future emergency that may see you needing to put ten grand on interest paying credit cards!

Original poster
PancakeInMaBelly · 04/02/2018 22:10

What an odd thing to say!
Everyone should have enough savings to live in for 3-6 months.
I dont, yet, so some of my emergency fund is my available credit, until I've build up my savings a bit more!

OP posts:
Original poster
PancakeInMaBelly · 04/02/2018 22:12

Surely any decent FA would tell you to have a "shit happens" contingency?

Ideally its savings. Granted. Im working on that too.

OP posts:
Desmondo2016 · 04/02/2018 22:17

You're not really getting it are you! Keep a credit card for emergencies. Like getting stranded abroad. Not funding your life for a few months when something catastrophic and highly unlikely happens.

Original poster
PancakeInMaBelly · 04/02/2018 22:20

What part of I.AM.BUILDING.UP.MY.SAVINGS have you missed here?

Until I have 6 months salary saved, then yes I want some OTHER way to put food in the table should my circumstances change for a few months.

I am not CHOSING for this to be necessary. I hope it won't be. But sh it happens from time to time..

OP posts:
DustyMaiden · 04/02/2018 22:28

Lenders like the balance you owe to be as small a percentage of credit available as possible. How many you have not relevant.