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Original poster

Will paying off debt improve credit score?

47 replies

SlothMamaToBe · 21/03/2021 12:08

My DP and I are looking into buying our first home. Unfortunately we have been declined an agreement in principle due to my DPs credit score. (I have never had a credit card and have a good score) . He has a history of debt issues which now on top of and he is currently paying off a credit card - around £1000 left. I’m wondering if I were to give him the money to pay off his debt would that sort the credit issue? We are otherwise in a really good position to buy but I wouldn’t be able to afford the home we need on my own. Both earn a good wage and I have a good deposit. My DP could then pay me back slowly over a couple of years without worry of interest etc.
Thoughts and knowledge much appreciated!

OP posts:
Buggerthebotox · 21/03/2021 12:12

Take look at Money-saving Expert (Martin Lewis). There's a section on understanding crexid scoring and improving it. Sorry can't link.

JLQ1020 · 21/03/2021 12:22

Agree with the poster above. Look uo Martin Lewis's website. Gives loads of examples how to improve credit rating. If there is only 1000k on a cc I doubt this is having that much impact on his credit file. I would alos look at both credit files and it will give tips how to improve credit rating.
Get on the electoral register. Close down any unused accounts.
Review any default payments. Does he have a CCJ or any other adverse credit? Check out all this.
It might not be a quick fix might take a while to get improved.
Hope it helps.

Original poster
SlothMamaToBe · 21/03/2021 12:35

Thank you both. Have looked at Martin Lewis stuff. He doesn’t have any ccjs or anything. He has 3 credit cards 2 in green and one he was struggling with but is now paying it back direct debit. His score was around 667 on transunion so not too low but unfortunately has stopped us going anywhere with getting a mortgage. If I just give him the money for the card he was struggling with then perhaps we can get on with buying a house?? I know these things can take time though and might not make an instant improvement?

OP posts:
Idontgiveagriffindamn · 21/03/2021 12:41

It’s a couple of years since I worked in finance so things might have changed...
There are 2 things a mortgage lender look at on a credit report - the history or score so someone’s record at paying the debt back. Late and missed payments affect this and CCJs are a major red flag. If this is not great it will take time to improve to a lenders satisfaction e.g. 12 months of regular payments
The second thing is the amount of serviceable debt someone has. What is the proportion compared to earnings? Is only the minimum repayment being made. This can be improved by paying the debt down or off.

Scbchl · 21/03/2021 12:44

Get a broker. They will get round this and look at your credit files to see where to match you with.

Buggerthebotox · 21/03/2021 13:45

Not sure if this is any good but Stepchange, the Debt Charity, has a mortgage department. It's free (as far as I know).

StarsonaString · 21/03/2021 13:58

Is £1000 a typo and you mean £10,000? If it will take him years to repay you a grand then you probably can't afford a property. What happens if the boiler breaks? If he earns a good wage, does he have ludicrously high outgoings?

JLQ1020 · 21/03/2021 15:42

Did u go to a broker, do it yourself online or did u go to a bank directly? Also did u input the data correctly if u did it yourself online?

When u need to input the loans, its the monthly payment and the total outstanding on the credit cards.

My OH did this and kept telling us we couldn't afford a mortgage until u had to point out its not the total load outstanding lol.

Also what % deposit do you have?

Original poster
SlothMamaToBe · 21/03/2021 15:49

It’s definitely £1000 on the card he was struggling with. We went to a broker who told us we were declined and after doing w credit check found it was my partner with the issue. His credit score was only a little bit below what’s considered ‘good’ so I am surprised we were declined but I think it was to do with the fact he was on a payment plan with it until recently when he’s changed to direct debit to pay it off. I have a good deposit £60k so we can definitely afford it just need them to accept us!

OP posts:
doctorhamster · 21/03/2021 16:25

1k on a credit card doesn't stop you getting a mortgage. Has he defaulted on payments in the past?

Username7521 · 21/03/2021 16:32

Have you ever had any credit? You need to show that you’re also able to manage and service debt. I would get a credit card and make sure you pay it off via direct debit.
I would pay off that credit card just in case, but it’s only 1k so not exactly high.

NoWordForFluffy · 21/03/2021 16:32

When you say he 'struggled with' the remaining card, what do you mean? Missed payments / late payments? It's probably the history of that card causing the problem.

Original poster
SlothMamaToBe · 21/03/2021 16:47

Thanks again for your responses. As far as I’m aware the debt is from years ago , he got in a bit of mess and was borrowing more and more. I think he got behind on payments for this card a while back but definitely did the last year if not longer has been paying everything on time and not had any defaults. He requested to pay less back when he was made redundant but now has switched to paying it back by direct debit. I saw his credit report and although I don’t have a good understanding of these things , nothing else stood out which could be held against him.

OP posts:
Original poster
SlothMamaToBe · 21/03/2021 16:48

I’ve offered to pay off the debt for him but he isn’t keen on the idea... I just want to do whatever I can to help us buy a house though

OP posts:
Original poster
SlothMamaToBe · 21/03/2021 16:50

@Username7521 only thing I have is my mobile which I pay off each month. Not had a credit card but my report wasn’t the issue , the mortgage broker told us it was DP.

OP posts:
louisejxxx · 21/03/2021 16:53

I would ask them to look at other lenders who accept bad credit - there are plenty out there on quite a wide scale.

Ivy48 · 21/03/2021 16:55

I’ll be honest sounds like someone’s telling porkies. I got a mortgage with £6000 of debt, crap salary and a partner with a history of a CCJ. Yeas it took some time but our broker found us one. Are you sure he’s told you his full credit history? He needs to go through his report thoroughly. No missed payments? When he paid the CC company back a lower amount was he in a payment plan? Sounds like it and those kinds of things log as defaults that last for 6 years

Original poster
SlothMamaToBe · 21/03/2021 16:58

@Ivy48 😔 I’m a bit worried about this. We keep our finances pretty separate so this came as a bit of a shock. Yes he was on a payment plan - does that mean the debt is significant? Even if I pay it off for him now will the fact that he was on a payment plan still be held against us?

OP posts:
Ivy48 · 21/03/2021 17:02

If he was in a payment plan then his account was in default as you were not meeting your credit agreement. He’s likely still in that plan as most CC companies will let you pay it back but cancel your account. You need to see his report from start to finish and understand it all. A default will be visible on your score for 6 years from the first registered default date. I’m inclined to think his history is a lot worse than he’s letting on. You won’t get a high street lender easily with any type of poor credit. I’d advise you both to request your Experian report (costs £2) each and read through them. Then look for a broker who can find poor credit lenders

Original poster
SlothMamaToBe · 21/03/2021 17:04

Thank you @Ivy48 . We both got our reports from Transunion. The broker did mention about not going to high street lenders but maybe a chance with other lenders but we would need a specialist broker 😕

OP posts:
Ivy48 · 21/03/2021 17:07

The banked told us to get the Experian ones but I expect they’re all the same. Defiantly try a specialist lender, that’s how we got ours :)

GappyValley · 21/03/2021 17:10

Missed payments will drag a credit score down, and take 6 years to disappear from the credit file so will have a big impact on your ability to get a mortgage.

Agree with the others. You need to speak to a broker with an adverse credit department
London and Country are good - all the advice is free and they have access to lots of specialist lenders

PurBal · 21/03/2021 17:19

DH had a loan he'd defaulted on from 5 years previously. No problem getting a mortgage. In fact our mortgage broker (politely) chuckled when we said we were worried about it. CCJs are more of a problem. Find a good broker.

LyingWitchInTheWardrobe · 21/03/2021 17:19

'As far as I know, specialist lender' = sub-prime. If you have to go via that route then being on a sub-prime list itself might not be the best for your credit.

Can you speak to a mainstream broker to get some more in-depth feedback? Your own score might be ok but not having a credit history at all might be counting against you as a couple.

I would also ask your partner exactly what his arrangements are, warts and all - because the answer might be glaringly obvious and it may be a relatively simple fix.

Get advice on oth your scores/financial circumstances.

MintLampShade · 21/03/2021 17:26

I agree with @GappyValley - I have always had a couple of credits cards and my credit score is mint. Has always been as I never miss payments and pay them off periodically. DH has an excellent score too and he had a £5k loan at the time of us buying a house, plus a car on finance. We had no issues and got a great fixed term mortgage rate. So I think it's the way you manage your debts that counts and also, debt to income ratio. Paying of a lump sum or having no credit whatsoever can also negatively affect rating.