Balance transfer advice

[crazy about cars]

A family friend has asked for some financial advise and I'm hoping for further input from PH.

He currently have 3 credit cards:

• Card 1 with main bank - 0 balance minimum credit limit.
• Card 2 - Active credit card. Currently have sizeable balance of around 5k
• Card 3 - Opened around 1.5 years ago to take advantage 0% balance transfer. Not much left and was told can afford to pay it off in 1 go

His plans are to:

• Close Card 1
• Transfer balance from Card 2 (and maybe Card 3) into a new 0% card and close down Card 3.

My concern is that his plans will somehow affect his credit history/profile. I believe he is also planning to apply for a mortgage in next 6 months or so.
Does having less credit card affect credit history? Should he just pay off Card 2 and not think about another balance transfer? He told me he could probably pay off Card 2 balance but would take sizeable chunk out of savings.

[MrChips]

They really need a financial advisor to ask these questions as I would think different mortgage companies may approach things differently

crazy about cars said:

His plans are to:

• Close Card 1
• Transfer balance from Card 2 (and maybe Card 3) into a new 0% card and close down Card 3.

That's pretty much what i'd be doing, especially if card2 isn't currently 0%. We've just completed on 2 new mortgages (one BTL) and they insisted we reduced our cards down to £4k even though they were interest free. I believe the more cards you've had and successfully managed them, not missed payments, and eventually paid off, the better effect on your credit score. However mortgages also pay large amounts of attention to outgoings and risk so there's no straight rule that applies to all.

[ncbbmw]

Personally the last thing I'd do would be to close a credit card that is linked to my main bank, unless paying a fee to keep the card or planning to move banks. I'd let it sit with a nil balance.

Find a new zero % card to move too and close the others.

[MrChips]

I'm not sure whether closing it or keeping it open is better or worse for your credit score, but if you don't cancel then you'll never get back in a position to take advantage of the introductory offers and they're always better than the existing customer offers.

[bayleaf]

What a situation to get in where you're concerned about where to have your debt in order to get more of it.

[MrChips]

bayleaf said:

What a situation to get in where you're concerned about where to have your debt in order to get more of it.

In the current climate with 0% interest, 0% transfer fees, and cashback for opening a new card then it's not exactly a bad situation so long as you have planned properly and know what you're doing.

[Pferdestarke]

The balance of £5k will reduce his affordability per month by £250 or 5% for the purposes of the mortgage application.

The nil balance will have no impact on his credit score.

The non utilised card will have no impact on his credit score.

Should they apply for a new one, the credit search will show up which will have a small impact on the credit picture performed in the background by the mortgage provider but should not be terminal.

His income, partner's income and their combined outgoings including hobbies, children, childcare, etc will be looked at and it will create a mortgage offer if their credit scores are high enough and their affordability underpins the loan/term requirement. Also their deposit and LTV will determine which products are offered.

Secured borrowing is more about affordability than what you owe.

Hope that helps.