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How Lenders Calculate Your Credit Limit

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  • AntWal
    AntWal Posts: 15 Forumite
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    Yes they do look at all those things, and I suppose we know that they look at the applicant’s credit report files. The question posed is more about what we know about the guidelines various lenders use to assess the financial status part of an application.

    They look at earnings and financial commitments. Some guidelines appeared on the web site mentioned in the original post and one reply has added another calculation. Each lender will have its own guidelines but it looks like one factor is around 50% or more of monthly income available to finance the mortgage. Anyone know if this sounds like it may be so?
  • thriftymomma
    thriftymomma Posts: 1,107 Forumite
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    Apparently, they deduct an amout per child you have also, so therefore reducing affordability. I have quite a few of those eeks!
    Got Halifax Classic to reduce my interest rate by 5% woohoo - 10/06/08 Thanks MSE!
    Another 3% shaved off 10/12/08
    ANOTHER 4 % June 09:beer:
  • AntWal
    AntWal Posts: 15 Forumite
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    Apparently, they deduct an amout per child you have also, so therefore reducing affordability

    It looks from the posts so far that non-mortage credit should be less than 20% of annual salary, and total monthly outgoings excluding rent or mortgage less than 50% of monthly income. Then they factor in the number of dependents.

    Does anyone know whether they treat a spouse as dependent if they are not working, or if they normally work but are unemployed at the time?
  • AntWal
    AntWal Posts: 15 Forumite
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    Do the credit agencies also consider any assets you have? They value the property if you are taking out a mortgage, and look at the equity in the property, but do they consider cash savings, shares, or other assets? Does anyone know?
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
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    AntWal wrote: »
    Do the credit agencies also consider any assets you have? They value the property if you are taking out a mortgage, and look at the equity in the property, but do they consider cash savings, shares, or other assets? Does anyone know?
    The credit agencies don't, because they don't know the value of such assets (they're not on your credit report), but the credit providers may consider these IF they know about them, ie if you tell them via appeal letter after a decline etc.
  • DipStick
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    Put yourself in the position of the lender, what would you do? You would lend someone as much money as you thought they would pay back. If you take out a card and pay properly and do not default they will probably increase your borrowing limit.
  • AntWal
    AntWal Posts: 15 Forumite
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    The posts so far suggest mortgage lenders may want to see in the region of 50% or more of monthly income available to finance the mortgage - with the request for 3 months bank statements perhaps being used to help confirm this.

    Does this match other peoples experience of mortgage applications?
  • MattLFC
    MattLFC Posts: 397 Forumite
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    I don't know how the hell they do it, but I do know that I got my HSBC credit card statement through today, and they have increased my limit by £1000...

    Im not going to go spending on the increase, but it may come in handy next year if things get tight, so its handy to have. I have been working on clearing the balance in the past few months, and was actually thinking they would lower the limit once I clear it.

    I am self employed with an irregular income, and although I have been with the HSBC for 15 years or so, I now have most of my income go into my Abbey business account, HSBC current account is only used for a few bills tbh.

    So I am actually quite shocked in the current financial climate they increased the limit on my account...
  • moneysavingallday
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    MattLFC wrote: »
    I don't know how the hell they do it, but I do know that I got my HSBC credit card statement through today, and they have increased my limit by £1000...

    Im not going to go spending on the increase, but it may come in handy next year if things get tight, so its handy to have. I have been working on clearing the balance in the past few months, and was actually thinking they would lower the limit once I clear it.

    I am self employed with an irregular income, and although I have been with the HSBC for 15 years or so, I now have most of my income go into my Abbey business account, HSBC current account is only used for a few bills tbh.

    So I am actually quite shocked in the current financial climate they increased the limit on my account...

    I've just signed up for the HSBC credit card. how long have you had yours?
  • MattLFC
    MattLFC Posts: 397 Forumite
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    Since the day I turned 18 lmao, which was 4.5 years ago!!

    They never even did a credit check when I was given one, I went in my branch after recieving a letter about my account being a Livecash account or whatever it was, and because I was 18 I was eligable for a current account, so I just had my bank account upgraded to a current account and they included the credit card automatically!
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