Cahoot reducting Flexible Loan Limit

lynzpower

Cahoot are a blooody law unto themselves. I suggest you all let the FSA know if you have had your limit reduced without 30 days notice.

v0n

Like everyone else I had my Cahoot revolving flexible loan reduced to £100 over what's already paid back. last week. Never missed a single payment, was never late, I thought of myself as perfect customer really. However I wrote to them with complaint to which I received interesting response:

"I would like to assure you that the review of your flexible loan limit is not just a reflection on the way you have been managing this account. For this reason, we have only reduced your limit to your outstanding balance and not asked you for any extra repayments.

We review our customers overall credit limits on a regular basis. The selection criteria for the decrease involves our own internal credit scoring analysis and data from external credit reference agencies. I'm unable to divulge the precise reason you've been selected, as the basis of our scoring system is commercially sensitive. However, I can guide you to let you know that it is likely to be your borrowing level with other financial organisations.
If you want to know more about the information a credit reference agency holds, you can make a request for the details held about you. Simply send them a written request, detailing your current and previous two addresses, together with a cheque for £2. cahoot uses Experian Ltd, although other credit reference agencies do exist. "


I have Experians CreditExpert subscription, so I know my credit score is very good. However, loan company reducing loan limit can damage that otherwise well kept score, because it will sound alarm bells to those lenders who keep their own additional scoring system. "Major lender cut credit limit, do they know something we don't, should we react and try to protect ourselves too".

Mass limits on borrowings could also mean Cahoot is in financial trouble or oversold its loans.

In any case, those who can should consider switching providers/lenders. If it was error - it's unforgivable, if it was mistake of a clerk - it's unforgivable, if it is sign of Cahoot going under - it's even more so.

hells_2

We're not alone!
Maybe we should picket Banco Santander (for it is they who own Abbey/Cahoot now isn't it!)
What is their game at all!!
I'm going to get shut anyway, it'll take a bit of time to pay off the couple of grand I do owe them but bang goes my business with them in future!
And I too have had the 'your behaviour with another lender' nonsense...and now Barclaycard go and do the same thing 24 hours later....but bless...they've reduced my limit by a paltry £50!!! lol!

Apologies for posting this subject all over the place but it seems we're getting stitched up here!

This is one for Martin to take on methinks!

mrcow

So Cahoot are reducing limits after have reviewing customers' overall borrowing with other lenders?

Is this not a good thing?

We're forever seeing members of these boards in horrendous debt that they have no way of ever being able to repay, and the question often asked is how was it ever allowed to happen (obviously the customer had a lot to do with it, but the lenders are also facilitating this problem).

I would see it as a responsible move on the part of Cahoot. They need to be giving you the correct amount of notice of course, and if you need to subsequently increase your limit in the future, I'm sure they'll look into it (tafter all, they are not closing your accounts).

As for reducing a credit limit negatively affecting your credit score, yar you sure about that? I've often reduce the limits on cards/changed o/d limits on a/cs and closed off unused credit agreements and have personally never noticed a negative impact on my credit score?

v0n

mrcow wrote:

So Cahoot are reducing limits after have reviewing customers' overall borrowing with other lenders?

Is this not a good thing?

Not really. Many people take revolving loans to pay off their credit card debt. It's much lower APR and you can use it again and again. What the response above basically says is that they checked what you pay off with that loan and for whatever reason they want to make it harder for you, so they lower the limit of the loan and effectively also the frequency of repayments you can make. They would rather you didn't have a chance to borrow more from Cahoot loan, than, for example pay quicker Abbey related credit card which has higher APR.

However, seeing that this happens to a lot of people in one go the chances are Cahoot oversold the loans - as in - the bag is empty and to offer new way of getting into debt to new customers they need to release "stale" money from loans people don't use or already paid back (and hence limit reduced only to not yet repaid level rather than a set % level).

In any case this is worrying.

As for reducing a credit limit negatively affecting your credit score, yar you sure about that? I've often reduce the limits on cards/changed o/d limits on a/cs and closed off unused credit agreements and have personally never noticed a negative impact on my credit score?

The problem is two fold.
First - example - the original poster had loan reduced by 80% - imagine you wanted to borrow 20,000 for home improvements, you carefuly chose low APR loan, with no early repayment penalties, got the loan but before you had a chance to spend it Cahoot reduced it to £4,000. Now, you can't take that low APR loan again, you can't do any improvements anymore with current loan, and other lenders are like "but you already have home improvements revolving loan with lower APR than ours on records" and you didn't even do anything wrong.

Second - if banks closing your cards have negative effect on your credit score I would imagine so do changes to loan levels. It's not often that banks reduce your loan level because they just feel like it - usually it's a suggestion that you have problem repaying your debt.

bert&ernie

I agree with the theory that cahoot may be cutting back unused limits in order to allow them to advance more funds on other business.

I'm not an expert on the financial side of things, but I do know that most lenders borrow the money wholesale in order to lend it to you and I at retail retail rates. When they agree to open your account and set your credit line, they must asses the probability of you defaulting and the expected loss if you were to do so. These figures are used to calculate the amount of securitisation that the lender must put up in order to ensure that it can make good on its own commitments to the wholesale lenders.

Having customers with unused credit lines costs them money because it ties up assets used as security - the higher the risk of said customer, the more assets that are tied up. It makes perfect since to try reduce the limits for these customers, but it would actually be better if they borrowed the money and therefore had to pay interest. Hence, cahoot are giving notice of limits being cut to give you time to draw down the cash if you want to (at recently repriced higher rates of course!). If they were really concerned about the credit risk, they would have cut limits right back immediatly - at least to current balances.

lynzpower

What does this suggest

Cahoot reducing flexible loan limits
Cahoot putting up peoples flexi loan limits almost at will and without any rela pattern of how this was thought through
Cahoot not really doing this transparently- ie users in a quandary about the whats and whys
Cahoot reducing their savings rates

nappentass

I've had these emails and apart from how worrying it is, and could be screwing up our debt clearing plans - considering my credit limit tonight is back to it's original figure - I'm wondering if this could partially be a systems screw up! Seeing as they have caused payment default situation in the past by not taking direct debits this wouldn't surprise me one little bit!
Hey ho.. roll on being debt-free...

J

hells_2

Ah, but it's not technically that magic date of 26th until they open for business tomorrow, probably! Then, we will all furiously log into our accounts to see what mess they have made!
A second email did go round advising the limits would be wrong and so they were changing them again, only on 26th, and in the meantime no changes would be made to our accounts.

Well here's hoping....but I'm not hoping for much!
Tis funny, because the money I drew out last Friday should clear tomorrow in my bank a/c....lol..but as I say, I'm not touching it *just in case* they want it back straight away!

hells_2

Have just logged in to Cahoot and yes, my limit has been reduced to just around £100 over my actual balance....so there you go folks, they've done it! Gah! Good job I took some dosh out eh!