Credit rating and getting a loan

AdamMc90

Hi there,

Right the quick background story is I've recently turned 21 so come into a bit of money. I had £1000 on my credit card which I have paid off. I have enough money left to pay car insurance off up front so I heard about Tesco loans doing good interest rates so I applied for credit through them.

The credit agreement was £6000 paid back over 36 months, total repayable around £6700. Which with my current financial status is pretty easy. (Around £189pcm).

Unfortunately I was declined the credit agreement and was told to join Experian credit rating to find out more information. I have done this and discovered I have a credit rating of 904, or "Good". So I'm a bit confused by the rejection.

After looking through my accounts on the Experian website I can see it still thinks I owe the credit card £1000 despite it being paid off.

So I was just wondering whether anybody has been in a similar situation or could shed any light on the situation, as getting more answers of Experian is a nightmare!

How long does it take them to update their records? Will this be the reason I was rejected? When the records are updated will I be approved? etc etc

Thanks for your time and sorry for rambling on!

Adam.

Tixy

Don't focus too much on the score. Its what is on the report that is important.

What credit accounts do you have showing on your credit file? Anything other than the credit card?
What is the limit on the card?
Have you made all payments on time?
How much do you earn?

Credit reports are usually typically 4-6weeks or so behind, so your balance should be updated soon.

yorkshire-lad

Maybe Lack of credit history is why you were declined, could also be your income amount?
How much do you earn a year?

If you came into abit of money, why the need for a loan.

Edit: tixy bet me to it

AdamMc90

The money isn't enough for a car + insurance + closing the credit card. Firstly I got rid of the CC as I didn't want several different debts. So I'd rather pay the insurance annual up front and get the loan for a decent car. Meaning I would like a £6k loan in a perfect world.

I currently earn £22.5k a year due to rise to £25.75k in October but obviously this wouldnt be accounted for.

My credit report shows 5 accounts:

Vodafone | Satisfactory | Update: 14/08/11
T-Mobile | Satisfactory | Settled | Update: 27/03/11
Natwest bank current account | Satisfactory | Update: 14/08/11
Natwest bank current account | Satisfactory | Settled | Update: 07/12/08
Natwest credit card | Satisfactory | Balance: £1193 | Update: 14/08/11

Obviously old phone contract is there, plus old bank account but I got a gold account. The balance on the CC is now cleared but not updated. Limit on the card was £1200. And all payments for all my D/D are paid on time every month.

Looks like I'm best waiting until the credit report updates and reapplying?

izools

You are ***VERY*** close to your limit on your card. This will raise concerns with any creditor.

Some insta-decline for a Debt:Limit ratio above about 85%.

I suggest you wait until the natwest card shows a NIL balance on your credit file and try applying elsewhere.

How many credit searches have you had in the last six months?

lee1985

AdamMc90 wrote: »

The money isn't enough for a car + insurance + closing the credit card. Firstly I got rid of the CC as I didn't want several different debts. So I'd rather pay the insurance annual up front and get the loan for a decent car. Meaning I would like a £6k loan in a perfect world.

I currently earn £22.5k a year due to rise to £25.75k in October but obviously this wouldnt be accounted for.

My credit report shows 5 accounts:

Vodafone | Satisfactory | Update: 14/08/11
T-Mobile | Satisfactory | Settled | Update: 27/03/11
Natwest bank current account | Satisfactory | Update: 14/08/11
Natwest bank current account | Satisfactory | Settled | Update: 07/12/08
Natwest credit card | Satisfactory | Balance: £1193 | Update: 14/08/11

Obviously old phone contract is there, plus old bank account but I got a gold account. The balance on the CC is now cleared but not updated. Limit on the card was £1200. And all payments for all my D/D are paid on time every month.

Looks like I'm best waiting until the credit report updates and reapplying?

Your bank account and vodafone do not have 'credit limits' or 'available' credit and therefore Tesco will have looked at your report and see that you have in total, £1200 of available credit and your balance was £1193 - so basically you are using almost every penny of money made available to you. This won't go down well with Tesco - they are one of the super prime lenders - that is they have tough criterion to meet when it comes to loans.

Secondly, how long have you had your natwest credit card and your vodafone contract? If you've had your credit card for less than 2 or 3 years you can forget Tesco as super prime lenders place more of an emphasis on a longer credit history in order to make a more informed decision. So you could have no debt at all and a flawless 2 year credit history but it is likely you would still be declined as there isn't enough 'history' to make a decision - remember lenders are trying to predict your chances of defaulting over a certain period of time and with history of less than around 3 years they cannot come to a safe decision.

If you've had your credit card for around 3 years or longer then it may be down to other information on your report such as previous searches (if you've applied for more than 2 forms of credit in the past 6 months then the odds are stacked against you).

AdamMc90

Would I have to apply elsewhere? Would I be auto rejected with Tesco now as I've been declined once?

I think I've had 14 searches, this is all insurance quotations though with me pricing up insurance quotes before I purchased any car? Is this bad news? I had no idea it could affect credit rating.

EDIT:

Just seen your response, lee. thanks for the help. Makes sense I suppose.

Now the credit card is paid off am I still unlikely to be given any credit? I have had the credit card for just under a year and the contract with Vodafone just over a year. The tmobile contract would go back a further 18 months previous to the Vodafone one, if that makes any difference.

So ultimately, I won't be given credit due to the credit card on the report? And even when thats gone, I still won't get a loan because I don't have enough credit history.

I assume this applies for all types of credit (eg car finance)? Guess I have to get saving...

lee1985

AdamMc90 wrote: »

Would I have to apply elsewhere? Would I be auto rejected with Tesco now as I've been declined once?

I think I've had 14 searches, this is all insurance quotations though with me pricing up insurance quotes before I purchased any car? Is this bad news? I had no idea it could affect credit rating.

EDIT:

Just seen your response, lee. thanks for the help. Makes sense I suppose.

Now the credit card is paid off am I still unlikely to be given any credit? I have had the credit card for just under a year and the contract with Vodafone just over a year. The tmobile contract would go back a further 18 months previous to the Vodafone one, if that makes any difference.

So ultimately, I won't be given credit due to the credit card on the report? And even when thats gone, I still won't get a loan because I don't have enough credit history.

I assume this applies for all types of credit (eg car finance)? Guess I have to get saving...

Saving is always the best way forward.

You're not doing anything wrong - it doesn't seem like you have any derogatory items on your report, it is just that today many prime financial institutions place a huge emphasis on a 'proven' credit file which means unless you have several years of history you are already fighting a losing battle. My other half is 20 and has a 2 year credit history with all 4 sub prime cards (Aqua, Barclaycard Initial, Capital One and Vanquis) that is flawless with around a 10% balance to credit limit ratio on each card. She's been at the same address for 10 years, the same bank and employer for 3 years which shows a decent stability and yet she's still refused prime lenders for small loans of only £1,000 and 0% cards - even her own bank.

Some people do get lucky, take izools for example, he was made bankrupt only a couple of years ago and now he has learnt to play the system and understand how lenders work and now possesses several credit cards and other credit facilities and runs them to perfection, something many people could dream of with such a horrible history behind them.

But, as a rule, it's better to have a 6 year fully searchable credit history even with a few blemishes such as two or three missed payments than a flawless 2 or 3 year history. This is because lenders can make better decisions over a longer period of time and therefore score you more accurately.

AdamMc90

Yer I can see their reasoning but I feel like I've been catagoried and simply rejected without my circumstances being looked at, bit disappointing really but not much I can do. Except save but even if I save £600 a month out my wages thats still 10 months until I get to where I want to be and I'll be poor in the mean time! I really wanted a car to get on the insurance ladder to getting that down as its pricey for my area.

Are there no lenders that give younger people a chance? I mean I'm on over £22k debt free and never miss a payment, is that not appealing to anyone? haha. Annoying thing is I was advised to go to Tesco by a lad from my apprenticeship (same age, financial situation) and he was approved on a 5.5k loan and had the money in his bank within 2 weeks!

Thought I had it all worked out I think I'll have to reconsider, I've been in touch with Experian I'll ask my bank for financial advice as well and see how I get on.

Thanks for the help by the way, much appreciated.

lee1985

AdamMc90 wrote: »

Yer I can see their reasoning but I feel like I've been catagoried and simply rejected without my circumstances being looked at, bit disappointing really but not much I can do. Except save but even if I save £600 a month out my wages thats still 10 months until I get to where I want to be and I'll be poor in the mean time! I really wanted a car to get on the insurance ladder to getting that down as its pricey for my area.

Are there no lenders that give younger people a chance? I mean I'm on over £22k debt free and never miss a payment, is that not appealing to anyone? haha. Annoying thing is I was advised to go to Tesco by a lad from my apprenticeship (same age, financial situation) and he was approved on a 5.5k loan and had the money in his bank within 2 weeks!

Thought I had it all worked out I think I'll have to reconsider, I've been in touch with Experian I'll ask my bank for financial advice as well and see how I get on.

Thanks for the help by the way, much appreciated.

You're welcome

As for your car finance comment, you are more likely to be accepted for car finance, especially as the finance is usually secured on the car - but you will pay a lot more than Tesco's rates and this will only finance the car - you will see no cash and this will not pay for your insurance which I would assume is the bigger expense (you don't want to spend thousands on a car in current times)?

AdamMc90

Exactly! I feel as if I don't start somewhere and bite the bullet I'm going to be stuck in this hole forever. I never got a car when I passed my test over 2 years ago because I thought it'd be more sensible to increase my income and then not financially burden myself, I'll wait for the CC to clear from the report and reassess then.

Also another lad I worked away with is 22 has a mortgage a 1k credit card and a 4k credit card and just got approved on an 8k loan. Seriously?!