New mortgages and credit card applications

[AndyGWP]

Hi. Daft question but I really don’t want to muck this up.

We’re due to exchange in the next few weeks and our mortgage offer was received back in November.

Am I correct in thinking that I can apply for new credit cards now because the lender won’t be making any further credit checks? (They performed a credit check when we applied 4 months ago – that’s sufficient, right)?

Lender is Barclays (if that matters) 🙂

• This topic was modified 54 years, 4 months ago by .

[JDB]

AndyGWP wrote:

Hi. Daft question but I really don’t want to muck this up.

We’re due to exchange in the next few weeks and our mortgage offer was received back in November.

Am I correct in thinking that I can apply for new credit cards now because the lender won’t be making any further credit checks? (They performed a credit check when we applied 4 months ago – that’s sufficient, right)?

Lender is Barclays (if that matters) 🙂

I recently helped my son (as the second name but no ownership) with a Barclays mortgage and just prior to disbursement of the funds they required the solicitor to get us to complete a further form confirming all the original information remained accurate and they did carry out a final credit check on both of us.

[Tarmohamed]

Do not apply for any form of credit until you have the keys.

[Peter K]

I have been told by mortgage lenders that a final credit check is sometimes done just before release of the funds. Not always, but the lenders have the right to do it before deciding if they will actually release the funds.

I would personally hold off until everything has completed, the monies have transferred and you have the keys in your hand. Until that moment everything is uncertain and the whole thing may fail to go through.

[Carlos]

Does this same advice apply to Agreement In Principle, which is valid for 3months

[JDB]

Carlos wrote:

Does this same advice apply to Agreement In Principle, which is valid for 3months

Yes, even more so than the firm offer. If the facts/basis on which they gave you the AiP change, so can their agreement. It is quite possible nothing will happen, but why take the risk on such a critical transaction? Also, I think it is reasonable to expect, in the current market conditions, for credit criteria to be tightened.

• This reply was modified 54 years, 4 months ago by .

[Andrew.]

When you are on the home loan pathway, avoid applying for anything new until you’ve got the keys. Also be careful about the utilisation of existing cards and overdrafts.

A lender would be jolly silly not to run a final credit check before drawdown, a CCJ or CIFAS record can be added at anytime.

Also, be mindful that some lenders/brokers use Open-banking, so some merchants are a red flag. Gambling is one, and some people have seem to spend a lot of money on extractor fans, ceiling fans and desk fans.
For one firm it seems to be the only thing they sell.

[jj]

Once you have received a binding mortgage offer, the lender may only withdraw it in very limited circumstances. The offer will provide a few standard terms, but MCOB 6A3.1 restricts withdrawal to circumstances such as unemployment, additional secured borrowing (eg taking out a further advance with your current lender), issues with the title, damage to the property or application fraud.

It is extremely unlikely that a credit card application would meet this hurdle. Even if you don’t yet have a binding offer, unutilised credit is viewed as a positive in most lenders’ models and will not adversely affect an application. However, credit cards that aren’t repaid in full each month are another matter entirely.

[Peter K]

jj wrote:

Once you have received a binding mortgage offer, the lender may only withdraw it in very limited circumstances. The offer will provide a few standard terms, but MCOB 6A3.1 restricts withdrawal to circumstances such as unemployment, additional secured borrowing (eg taking out a further advance with your current lender), issues with the title, damage to the property or application fraud.

It is extremely unlikely that a credit card application would meet this hurdle. Even if you don’t yet have a binding offer, unutilised credit is viewed as a positive in most lenders’ models and will not adversely affect an application. However, credit cards that aren’t repaid in full each month are another matter entirely.

The OP sounds like he has a mortgage in principle, not a binding offer. Taking out a card could be seen as needing an extra line of credit… not something a bank would want to see before handing over a large sum.

[AndyGWP]

Thanks so much for the opinions and advice here folks. I’m not 100% familiar with terminology, but to my knowledge it is a binding offer. So far, the order of events is as follows:

October ’21:
– we did the Agreement in Principal a soft credit check was performed
– we made the offer on the property

November ’21
– we had a mortgage interview with Barclays
– a hard credit check was performed as part of this
– mortgage paperwork was issued to us, signed and returned to Barclays
– this had a validity of 6 months and locked us into the product we wanted

March ’22
– probate was issued for the property we are purchasing
– exchange is due later this month (just completed TR1 form)
– completion is due for the end of the month

[jj]

@AndyGWP, that sounds like an offer to me.

I’ve worked in mortgage credit analysis with several lenders for decades. I can’t speak for the whole market, but we would never withdraw an AIP or an offer because someone had taken out a credit card. However, if you take out additional borrowing that would affect your affordability assessment, an AIP could be withdrawn.

Undrawn credit (ie the limit on a credit card) does not affect affordability; however, the account balance does. So don’t worry about applying for another card, but do make sure you don’t increase your borrowing and, ideally, pay off your account balance in full each month.

If you’re looking for things to avoid, don’t borrow money for any other purpose (eg a new car). Absolutely avoid any payments for online gambling if that’s your thing. Don’t even think about a payday loan. And don’t enter into any other significant financial commitments – Sky Sports, school fees, new iPhone contract, regular pension AVCs, for example – unless you know that you passed your affordability assessment by a big margin. Many lenders are adding extra bunce into their calculations to allow for future cost of living increases and you don’t want to be caught out.

[AndyGWP]

Brill – thanks @jj – that’s a good insight

I’ve no immediate plans and all of my credit is undrawn (and would stay that way regardless)…. if it was a no-brainer of a “you’ll be fine”, then I’d be contemplating the new Barclaycard as soon as Rob publishes the details. I’ll probably play it safe and wait till after the big date, as I think my partner will stab me if this goes wrong

If its a worthwhile offer, then hopefully it will have a decent end date on it anyways that makes all the above concerns redundant 🙂