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Original poster

Credit card and mortgage app

17 replies

trampoline123 · 26/10/2023 13:40

First time buyer here, well hopefully soon!

Does having a credit card impact a mortgage application decision?

It's just under £4K, no late payments and paying more a month than minimum.

OP posts:
SOBplus · 26/10/2023 13:45

Yes,

They will evaluate how you handle your bills and ALSO whether you can afford your bills and mortgage. Not clearing the credit card will be a big red flag. Also, something I didn't know until mortgage lender told me - any lottery or gambling charges on credit card or direct debit is an immediate NO on mortgage approval. My gambling "problem" was flagged (£10/month on Euromillions monthly direct debit, had to re-apply 6 months after stopping the direct debit).

Original poster
trampoline123 · 26/10/2023 14:02

Interesting about the lottery, luckily we don't play that.

Thanks, we've been accepted for a mortgage before and our salaries have increased since then so we can afford bills and mortgage repayment it's just the CC that's new.

OP posts:
Thebigblueballoon · 26/10/2023 14:04

You want to get rid of the 4k balance on your credit card - ideally wipe the balance down to zero a couple of months in advance. It will affect your application and you may even be refused due to the debt.

SOBplus · 26/10/2023 14:06

Wasn't saying its an issue, just they will look at it that way until you prove it isn't. It's a red flag that you will have to either explain or eliminate. Explanations can be it was an emergency 1x thing or its on a 0% rate and therefore not a priority while getting ready for the mortgage, etc., or any other logical reason for why it shouldn't appear as the red flag it at first appears. If its unexplainable you will need to get rid of it ASAP in my experience. Good luck.

Original poster
trampoline123 · 26/10/2023 14:13

Ok - thanks all. We can use savings to pay it off and then pay back our savings

OP posts:
Nw22 · 26/10/2023 14:22

In my experience it may slightly reduce how much you can borrow but won’t stop you getting a mortgage

CherryBlossom321 · 26/10/2023 14:26

I had credit card debt during my previous two property purchases (five years and then three years ago), and it didn’t cause any issues. But I understand lending criteria is now more restrictive. If you have savings, pay it off.

CloudPop · 26/10/2023 14:40

Just to state the obvious, it's the debt that's the issue rather than a credit card itself. If you have a credit card which you pay off in full each month it's very good for your credit score.

PinkRoses1245 · 26/10/2023 14:53

SOBplus · 26/10/2023 13:45

Yes,

They will evaluate how you handle your bills and ALSO whether you can afford your bills and mortgage. Not clearing the credit card will be a big red flag. Also, something I didn't know until mortgage lender told me - any lottery or gambling charges on credit card or direct debit is an immediate NO on mortgage approval. My gambling "problem" was flagged (£10/month on Euromillions monthly direct debit, had to re-apply 6 months after stopping the direct debit).

Edited

This all a load of rubbish. We have credit card debt and national lottery direct debit, and got a new mortgage recently no questions asked, and both in brand new jobs, and we'd just taken out a car loan. You'll have to declare the credit card payments as debt repayment.

newhousenewhouse · 26/10/2023 15:00

I've just got a new mortgage and pay the lottery have a monthly direct debit and occasionally play a game so top up my account.

bombastix · 26/10/2023 15:03

It can affect how much you get offered. Broker told me that the amount owing will be tripled for the overall calculation of what can be leant and then that amount deducted. This was four years ago

Original poster
trampoline123 · 26/10/2023 15:56

Thanks all - have a call with the mortgage advisor next week so will ask him. Our savings are for our deposit so would rather not dip in to it if we done have to.

OP posts:
Coffeepot72 · 26/10/2023 16:01

My gambling "problem" was flagged (£10/month on Euromillions monthly direct debit,

In that case, DH also has a gambling problem!

RJnomore1 · 26/10/2023 16:05

It’s based on affordability so if you’re borrowing a low loan to value on the house, which isn’t much of a multiplier on your annual income, and have plenty of disposable income/savings it won’t be a problem. If you’re trying to stretch to the max you can possibly borrow it’s more likely to be.

In itself it definitely won’t stop you getting a mortgage.

luluofthevallies · 26/10/2023 20:20

No it won't affect your application. It may affect how much you want to borrow as the amount owed is taken into account re affordability.

Jmaho · 26/10/2023 20:45

I'm a Mortgage Underwriter. I would say that over 90% of people I review have debt of some sort, some have a lot! When looking at credit cards as long as you're not very close to the limit or have a number of cards where you are close or we can see you are taking cash advances then they are not a problem. They are deducted for affordability though so it will reduce how much you can balance
On the subject of bank statements we're honestly not as strict as some people on this thread have suggested. We don't bat an eyelid at national lottery, we have a team syndicate! Same with small level betting. As long as its not a lot and doesn't indicate any problems then it's fine
Also overdrafts are OK as long as limit isn't exceeded or its a huge limit and you're never in the black.
Bank stats give a good overview of your finances but they're literally a snapshot. I would never decline someone based on them playing the lottery or having a single credit card. Declines are usually for a number of reasons all added together
In your case I think you will be fine

strawberry2017 · 26/10/2023 21:10

Credit cards are a bit of annoying thing. In one way the banks want you to have a line of credit so they can see that you can pay it back and manage it correctly to show you are reliable but then they also get held against you when you want to borrow more.
Have a small balance isn't the worst thing in the world

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