Interesting question: loans with YOUR own bank

[Deleted User]

Having spent a fair bit of time on this forum, I've seen lots of people being told the same advice when applying for loans or credit: that your best chance is to apply to your own bank that you have your day-to-day banking with.

Whilst I'm not disagreeing, I'm just curious as to why this advice is given - and whether there is evidence to suggest your own bank is likely to be any more lenient in assessing an application for credit than it would a non-customer.

Given that lending criteria are secret, how do people know that someone's own bank are more likely to accept them than a non-customer?

Although they have access to more information on that consumer, why does that automatically assume they will apply that data in a more positive way for customers?

Surely they score customers and non-customers equally?

Like I said, I'm not suggesting any of this is wrong, but I've seen these comments so many times and wanted to see what evidence people had that suggested banks are more likely to lend to their own customers than to non-customers.

~Brock~

Your own bank are the only people that have access to how you handle money on a day to day basis, because they see your salary and bills going through your current account, and can get a pretty good idea as to how well you can afford to pay a loan back.

Because of this, and as you spend more time with them as a customer, most banks build up an automatic lending limit on you even if you dont even apply for any loans.

Whilst the details of your credit files are also taken into consideration, if you are behaving yourself with your bank this is likely to count as a big plus point in your favour.

CLAPTON

The advice is often given when the purpose has no significant credit history i.e. doesn't have any CCs or loans.
Their own bank at least knows they handle there current a/c well whereas other lender will know nothing at all.

In the current climate you will I'm sure you'll have noticed that some loans are available to 'existing customer' only.

BenL

I used to work for a bank and we had access to screens that showed how much of an unsecured loan the customer can be offered without full underwriting, credit card limits that would be offered without a problem, if they can be upgraded to a full visa debit card from electron and how much overdraft they can have.

At the end of every month an internal score was generated from how a customer behaved that impacted these values every month.

If you apply within the limit it will go through, over the limit and the external checks are done. The most weighting is given to the internal score then the outside (e.g. experian) score.

In addition there was customer wide checking across the whole product database as to who are the best customers from the products they have.

All products from banking, saving, cards, loans, mortgages, home, motor, life insurance all fed into the database.

You can then target the customers you want more effectively for marketing too.

There is reasoning behind the advice.

BigDave81

It's simple enough as said above, your bank will have more information to hand than other lenders, they know your exact monthly pay, your expenditures, other commitments via direct debit payments...

However in my opinion this can work both ways!

They maybe offer you what you want if it is reasonable in their opinion and matches with their tick box system internally but as they know how you manage your accounts and what savings you may have with them and the use of your overdraft etc it could go the other way as it did with me once.

I am with Nationwide, had a lot of accounts with Nationwide and also a loan, the loan was about £6k, always paid on time with everything and have never missed a single payment in my life for anything and had various credit cards but when I asked to just bump it to £10k which was still easily affordable it got a straight decline.

I applied to Northern Rock who at the time had a great rate, it was a straight accept and I had the money in my account within 48 hours. What makes this seem even more odd is although I classed the loan as debt consolidation (which I know now is not the best thing to do but this was about 4 years ago) Nationwide said no when they would only need to give me £4k more but Northern Rock said yes and gave me the money which menat I could continue with both loans if I so wished!

I thought it was very odd and I am sure Nationwide had their reasoning but never made sense to me and meant I paid up the Nationwide loan the same day I received funds and they lost out on making some money out of the interest.

[Deleted User]

That was exactly my point in the original post: surely it can go both ways?

I've had the same thing: Barclays declining me but Abbey accepting, even though I bank with the former.