Good Credit but declined on affordability

Sophie-Louise_2

I applied for a loan with Natwest who my normal current account is with 6 months ago and was declined. I hadn't questioned it at the time as I wasn't desperate, and was just told to try again in 6 months. I've now applied again as I'm trying to buy a used car and have again been declined. I've checked my credit file and I score in the Good category at 465; 474 is needed for the excellent category. I have credit agreements but all are up to date. I called Natwest to ask why i was declined and they said this was because of affordability, at the end of the month I have little left in my account.

I'm 20 years old and have no substantial outgoings such as mortgage or rent, I don't even pay board. The only things I pay for are a mobile phone bill, a credit card and two store cards, and up to now I hadn't been driving so I've had no car payment or insurance payments going out at all. I spend the rest of my disposable income on clothes and the like, simply because I have no other credit agreements. I do agree with the bank and understand what they're saying, and know that I shouldn't spend all of my money every month, but I'm not tied into an agreement so can still afford to make monthly payments based on my income, which will be going up in salary by £1500 next month.

Does anyone know of a way to get around this rather than keep money in my account for a few months and having to try again then, as I really am desperate? I have only checked my credit file on Equifax recently which doesn't show this recent decline which I assume was done through Experian and I understand Experian may show a worse credit file for me so I'm hoping to find someone who uses Equifax as I know my score is good.

Thank you

Hax

Firstly, stop spending your money on your credit score. Checking your credit record is fine - but buying the score is pointless as each lender has their own methods of scoring you.

Next:

What are your current credit limits? And how much of each of those limits is in use?

Do you have an overdraft? If so, do you ever use it?

How much were you looking to borrow?

What is your current salary?


Answers to the above may help with determining why you were declined and if there are any other options out there for you.

CLAPTON

given your income and virtually no outgoings, why do you need a loan?

Sophie-Louise_2

Thanks for both replies, my credit card has a £650 limit of which £400 is currently in use. The minimum payment is around £14 a month but I tend to pay at least £30 off every month if not more.
One store card only has a limit of £150 which currently has £80 on but I pay that one in full every month.
The other store card was a Mastercard so could also be used elsewhere as a normal credit card, with a £750 limit, which I currently have around £500 outstanding on. Again I pay more than the minimum as this one has the higher interest rate so I'm trying to get it paid off quicker.

Basically when I turned 18 and realised I could get accepted for these things I took advantage and thought nothing of it at the time, stupidly!

I don't have an overdraft at all so no have never used one.

My salary is £13,500, going up to £15,000 plus bonuses as of the 16th May.

In response to Clapton, I applied for a loan hoping to buy a used car in a one off payment as it was through a private seller and of course it couldn't be financed. I haven't saved unfortunately so there was no other way to get this lump sum.
I'm now considering finance instead and paying monthly as I know it's more affordable for me monthly unless I can wait until I've saved enough money, but I'm wary of trying for finance straight away so soon after applying for the loan and just being declined over and over again.

Thanks again for both replies

Sophie-Louise_2

The first loan I applied for was in hope of paying off the other cards with high interest rates and having one simple monthly outgoing. I wasn't desperate for it, it was for simplicity, which is the reason I didn't look into it further as it was causing me no real issues. My situation has changed since whereby something is needed as a necessity that wasn't previously. Unless I buy a very old car that's likely to break down or cause problems and cost me more money in the short term anyway, I think it's quite easy to work out that I can't buy a car with one months wages. So no, not a fashion accessory and not for the hell of it.

opinions4u

As you don't seem to have been able to save, how will you be able to afford the loan payments?

Have you budgeted for insurance, service, tax etc?

Have you budgeted for the unexpected £500 repair bill that will inevitably hit you?

While paying the loan, will you also be saving up for the next car after this one?

I have genuine concerns that somebody who doesn't manage to clear modest card balances in full actually has the ability to pay for a car loan and afford to keep a car on the road.

Budget very carefully.

Hax

I think one of the problems you have is that you have three credit/store card balances which are all in excess of 50% of the limit. Whilst each of them is pretty small, any potential lender would see you as struggling as you have these three small balances kicking around that you appear to unable to clear or make much of a dent in.

As for your comment about a cheap car costing you more in the long run, that really does depend on many factors.

Firstly, how many miles per month do you estimate you will be travelling? If you will only be doing a couple of hundred, then an "old banger" with 6 months tax and MOT for (say) £300 would probably be more than adequate - that would then give you chance to save £300/month over the next six months to get a better car if you feel the need.

However, you need to remember that your insurance is likely to be around £1000 or more - especially if you have no previous no claims bonus and with you being a young driver!

And whilst many insurers offer monthly payments, that then adds on extra costs (interest + admin fee) and may well be subject to a credit check.

Why has the necessity for owning a car suddenly arisen?

Sophie-Louise_2

I haven't found it impossible to save, I've just chosen not to. At the time I didn't want to or feel the need to, this is not to say that I can't pay monthly loan repayments.

My wages are paid into my account every month, I work in the vehicle industry and yes having factored in insurance, tax and servicing etc it is affordable and I will still have money left over. As mentioned up until now I'd had no real necessity and simply spent my money on things I wanted rather than needed, which I'm sure most teenagers are guilty of.

Unfortunately just admitting I was wrong not to save and to just spend my money on things I didn't need doesn't really help in the short term. I am aware that I now need to save and pay off more of my existing debts which I am beginning to do and will have enough money each month to do so but what I'm after is advice on the best route to take in the immediate future.

As I said I understand where the bank is coming from with their decision and know that's all my own doing, but unfortunately a car has become a necessity with the new job and various other factors. Getting into a new credit agreement obviously isn't my ideal choice but doing the right thing from now is all I can do surely.

Do you think that most companies (whether loan companies or for vehicle finance) would take the same view based on my disposable income or is it something I could appeal on the basis that I'm not tied in to the majority of the things I'd previously been spending my money on?

Thanks again for all help given

Sophie-Louise_2

Hax wrote: »

I think one of the problems you have is that you have three credit/store card balances which are all in excess of 50% of the limit. Whilst each of them is pretty small, any potential lender would see you as struggling as you have these three small balances kicking around that you appear to unable to clear or make much of a dent in.

As for your comment about a cheap car costing you more in the long run, that really does depend on many factors.

Firstly, how many miles per month do you estimate you will be travelling? If you will only be doing a couple of hundred, then an "old banger" with 6 months tax and MOT for (say) £300 would probably be more than adequate - that would then give you chance to save £300/month over the next six months to get a better car if you feel the need.

However, you need to remember that your insurance is likely to be around £1000 or more - especially if you have no previous no claims bonus and with you being a young driver!

And whilst many insurers offer monthly payments, that then adds on extra costs (interest + admin fee) and may well be subject to a credit check.

Why has the necessity for owning a car suddenly arisen?

Thanks again for your reply.
I'm likely to be doing at least 150 miles a week, so around 600 a month.
I've taken a new job that is slightly more money, but mainly has much better future prospects and opportunities for myself, as well as additional bonuses and employee benefits. All in all a much better job than I currently have. The place where I currently work was on a major bus route but also near to where one of my parents worked with the same working hours. Obviously it was the more convenient job but not in the long term. I'd been putting off driving as I didn't really want to but now with the new job I'm taking being slightly further away and different working hours, with no bus going near it, although still possible it's just very difficult to get there without having to leave 2 and a half hours before I start work.

Sorry for the long winded explanation, but basically just a much better opportunity for me and the reason for needing a car.

In regards to insurance you're right I have 0 no claims bonus etc, but for just the advance payment for a year I think my parents may be willing to help me out in that regard.

dwsjarcmcd

Have you tried asking your parents to act as a guarentor for your loan with the bank? We were all 20 once upon a time and spent what we earned, that tends to go with the territory!

When I was about your age I needed a loan but my bank wouldn't give me it. I didn't want to ask my parents for the money as I wanted to be independent but the bank were much more agreeable if my Dad acted as a guarentor, which he was happy to do. Needless to say I got the loan and repaid it without him needing to step in. You very soon learn to budget for the repayments and spend less elsewhere.

jonjamie1970

Just a point, if your salary is onnly increasing by £1500 quid a year and you dont make your bonus as I'm sure they are not gauranteed then you are going to be worse off by the time you have bought a car / insurance and £70 of fuel each month ? Is the new job worth this investment, just something to ask yourself ? I understand that it may be a short term spend for better long term prosepcts but you have to be realistic on the bonus front.