Credit applications - should I limit them?

[Kai1981]

I was accepted for a mortgage two months ago and have just applied for an interest free credit card which was accepted too (for renovations). The limit on it is only £1.2k though.

I have two other credit cards that I pay off in full (but interest charged otherwise).

I basically need some short term money to pay for all the renovations. I don't want to dip into my ISAs if I can help it as I have regular salary coming in in the next few months (and beyond) so can definitely repay everything. So I was thinking of Paypal credit as it's 4 months interest free which is all I need really.

But should I worry about yet another credit application within a close period of time?

Prior to the mortgage application my credit rating was 99%.

Have you completed on the mortgage or is it still going through? If still to complete then you do risk the mortgage offer

Wait til you've completed!

Assuming you are UK (which is a score rather than percentage) Too many credit applications will affect your credit score - a credit application search is a credit affecting (hard) footprint on your credit file. Too many credit applications in a short space of time is a risk factor for lenders so that is why it decreases your score fairly significantly. If your mortgage has already gone through, then you might not mind a dip in your credit, but I would be cautious if it hasn't as it could affect your ability to get a mortgage. PayPal credit leaves a hard footprint in the same way as opening a credit card so would have the same effect on your credit score. Please make sure you check all 3 credit scores as well (Experian Equifax and TransUnion via credit karma) because lenders use different ones and each gives a slightly different weighting/score.

Why wouldn't you use the ISAs and then replenish? Madness to take credit when you don't need to.

Thanks. The mortgage is completed.

ISAs offer tax free savings but as soon as you take out of them, you've lost that, even if it's for two months.

So I was trying to find short term 0% interest options instead. Not sure how that's 'madness'.

Presumably you don't pay tax on the interest you earn, and probably won't in the foreseeable future, so there's no harm in using your ISA instead of getting into debt.

But it's short term debt of 2 months. Compared to losing the ISA tax free allowance from a previous year forever?

@LubaLuca

Presumably you don't pay tax on the interest you earn, and probably won't in the foreseeable future, so there's no harm in using your ISA instead of getting into debt.

Exactly. Tax on savings isn't going to be an issue for 99.9% of the population any time soon. Everyone has a £1000 (or £500 if a higher rate tax payer) allowance outside ISAs, and at current rates, you'd have to have at least £100k+ of cash savings to breach that.

But if your mortgage has completed your credit rating really isn't anything to worry about, so if you prefer to use Paypal credit at 0% instead of your ISAs then crack on.

Ah Ok I see what you mean about tax free savings in that case. I might need to rethink as Paypal declined me so it was probably one application too many.

I think currently, for most people, the priority would be getting the best interest rate on the money you will/might need to spend in the short to medium term (this is often not ISAs, but instant access or even premium bonds as an alternative if you have say £20-50k) then reducing your debt including mortgages, as the interest rate on that will be higher in most cases. Then think about longer term investments and pensions.

Only after all that is maximised would it be worth bothering with a cash ISA and in reality, I'm not sure many people would exhaust all the above and get that far.

Can't you just delay the renovations (the non vital ones) by 2 months while you save up the money?

What sort of ISA? You might find if you look into it that you're not getting anything from the ISA. I recently got rid of my cash ISA as the personal savings limit means I can earn interest on my 30k tax free in a savings account with a better rate.

ISA rules have changed - check yours but you should be able to keep the allowance if you top it up within the tax year.

Thank you, so useful to know more about the ISA allowance rules and the benefits. I think I've put too much value on them and it sounds like there are better options.

I think I'll use my current ISA to pay for the renovations and then work out the best way to save in future after that.