Credit ratings and savings

sh856531

Hi there,

Can anyone tell me - does the amount of savings you have get taken into account when your credit score is calculated?

For example, if I had £30,000 worth of debt (I don't) and 100,000 in cash in an ISA (again I don't), would the credit reference agencies understand that I actually have no net debt? Or would they just see me as being in 30K worth of debt and thus a relatively high credit risk?

Would the fact that most of my savings exist in the form of a stocks and shares ISA make any difference?

Many thanks all

S

redpete

Warning - the following is uninformed opinion that has never been acquainted with fact.

sh856531 wrote: »

Can anyone tell me - does the amount of savings you have get taken into account when your credit score is calculated?

Not by much if I was designing the risk assessment for a lender. I would take into account the possibility of you taking out all your savings and gambling it unsuccessfully on the result of the Grand National. You would end up with no savings and exactly the same debt as before.

Would the fact that most of my savings exist in the form of a stocks and shares ISA make any difference?

Again if it were me making the judgement it would make a difference, the money is not necessarily instantly available to service debt and "shares can go down as well as up".

Hax

If applying with the bank you have the savings with, then it's quite likely that it would be taken into consideration.

Any other lender is highly unlikely to take this into account as (to my knowledge) only money owed is reported through the CRAs.

Savings accounts are not usually reported on.

I guess that the clue is in the description "Credit Reference Agency" - and savings accounts do not extend a line of credit

CLAPTON

savings and stocks and shares are not recorded by credit agencies whereas debts are

so there is no way a potential lender knows you have more savings than debt

sh856531

Thats actually quite interesting then

That means they don't have as good information as I thought they had.

For example, that tends to suggest that as far as the credit reference agency is concerend - there is no difference between a millionaire with a debt of 100K on credit cards and someone who earns 12K a year having the same amount.

As long as the payments had been made for a long time - the credit ratings agency would see them as being the same risk - something that seems quite absurd to me...

Thanks

S

CLAPTON

sh856531 wrote: »

Thats actually quite interesting then

That means they don't have as good information as I thought they had.

For example, that tends to suggest that as far as the credit reference agency is concerend - there is no difference between a millionaire with a debt of 100K on credit cards and someone who earns 12K a year having the same amount.

As long as the payments had been made for a long time - the credit ratings agency would see them as being the same risk - something that seems quite absurd to me...

Thanks

S

credit agencies don't assess risk and they don't make loans; they simply keep records of people's debt and how they repay it

potential lenders assess risk based on the questions they ask you on application forms and the debt inforamtion held by the credit agencies and any other info they can gather

zppp

sh856531 wrote: »

As long as the payments had been made for a long time - the credit ratings agency would see them as being the same risk - something that seems quite absurd to me...

Arguably it could be seen as absurd that one would borrow £25k at 9% APR, yet only recieve 3% interest on ISA savings of £100k.

noh

sh856531 wrote: »

Thats actually quite interesting then

That means they don't have as good information as I thought they had.

For example, that tends to suggest that as far as the credit reference agency is concerend - there is no difference between a millionaire with a debt of 100K on credit cards and someone who earns 12K a year having the same amount.

As long as the payments had been made for a long time - the credit ratings agency would see them as being the same risk - something that seems quite absurd to me...

Thanks

S

The Credit Reference Agency does not assess risk.
They collect data and provide that data to their customers.
The individual provider of the credit facility uses that data and data from other sources plus information provided by the applicant (which may include income and details of assets) to assess risk.