MSE News: A payday loan could cost you a mortgage

BugsyBrowne

This is still very old news for most of us who knew what damage these PDLs do to someone's credit file.
You also had the disbelievers who said theirs no effect and it only helps their file as it shows paid back on time, well how wrong we're they.

rtho782

BugsyBrowne wrote: »

This is still very old news for most of us who knew what damage these PDLs do to someone's credit file.
You also had the disbelievers who said theirs no effect and it only helps their file as it shows paid back on time, well how wrong we're they.

Bear in mind that this is only a recent change from Experian, until about 6 months ago they simply showed as "loan" rather than "payday loan", both to customers and other lenders.

I know some lenders still only see "loan"!

KingElvis

^^ No, not quite true.

They showed up as a "Payday Advance" or something along those lines.

Would you lend money to someone who needs to use them? I sure as hell wouldn't.

rtho782

Last time I took out a HP agreement with Black Horse, in Nov 2011, I shopped around a few dealers. After the first dealer putting the wrong price through the proposal, having to repropose it, then deciding to be awkward about other things I told them where to shove their motorbike. Ironicly, this dealer was George Whites, who have since gone bust. All three props they put through were accepted by Black Horse, probably at least partly because I'd cleared in full two previous deals with them.

I then went to my local dealer, and repropped the same deal at a slightly lower price on the exact same bike. The previous props had gone through as instant accepts, this one got declined - probably because BH now had 4 live props on their system for me, and each of these had resulted in a credit search. Based on the previously accepted props (which I had documentation to show) the dealer spoke to their BH account manager, and one of the underwriters ended up calling me to go through my credit file with me.

He told me he could see I'd had and paid a lot of loans, but it was only when I told him what they were he realised they were payday loans. Until that point, he had only been able to see that they were loans.

This nearly cost me the finance proposal once he found out, but in the end on the basis that I'd cleared two previous loans with them and that I suggested I put down a larger deposit, as well as pointing out that I could easily wait 6 months and gain an auto accept through their system, they let me have it.

The point being, that certainly as recently as November last year, at least some lenders could not see payday loans as different from loans.

~Brock~

@KingElvis & rhto782 you are both partially correct.

When it comes to Experian, whether a lender sees a PDL for what it actually is depends on the type of system they are signed up to, because the older data versions do not have the ability to separately mark PDL's as such, so they are just categorized as 'Personal Loan'.

The latest version of the datasets will identify PDL's correctly but many lenders will not have moved over to this because there is a cost involved that may be quite significant for some.

This will gradually change of over time, of course.

BugsyBrowne

~Brock~ wrote: »

@KingElvis & rhto782 you are both partially correct.

When it comes to Experian, whether a lender sees a PDL for what it actually is depends on the type of system they are signed up to, because the older data versions do not have the ability to separately mark PDL's as such, so they are just categorized as 'Personal Loan'.

The latest version of the datasets will identify PDL's correctly but many lenders will not have moved over to this because there is a cost involved that may be quite significant for some.

This will gradually change of over time, of course.

I think as soon as the lenders get a sniff of this new system I am sure the cost won't be a problem.

geoffky

rtho782 wrote: »

I don't agree it automatically makes someone high risk.

I have 18 PDLs showing on my credit file since 2010. The most recent was settled 24th May 2012. I shouldn't need to use them again, but this means they will be on there until 2018.

In the last six years I have not missed or been late with a single payment, or had to make only a part payment, on any PDL, Loan, or credit card.

I have 5 credit cards. All are paid on time. I clear the full balance approx 50% of the time. The rest of the time I'll carry a balance for a month or two, but I always pay substantially more than the minimum.

I have had 3 HP agreements with Black Horse since Dec 2010. Two of these have been cleared in full within the first 6 months of their terms, the latest one is now 8 months into it's 48 months, and no outstanding monies were rolled into it.

I have had a total of 5 regular loans in the last 6 years. One was paid off on schedule, one was cleared in full inside it's first 6 months, of the remaining 3, one has been part settled for about 75% of it's sum and will be gone shortly.

I have an overdraft, I don't use it constantly, I have never ever gone over it and have not had a single bank charge in 6 years.

I'm by no means perfect, I have a relatively high level of debt, about 35% of my income, but I don't believe I am a poor credit risk because I have used PDLs. In some ways I'm probably quite a good customer for a lender - I will pay back what I owe, quite possibly early, and I will pay you interest, I'm not someone that will pay in full EVERY month, or only ever use 0% deals.

In fact, as I work in Financial Services, my employer searches my file every 3 months (shows as an unrecorded enquiry) and were I to default on something I would be at significant risk of losing my job. This kind of incentivises me to pay, and in my opinion is certainly more of a positive than a PDL is a negative.

Had it been the case a couple of years ago that lenders could tell the difference between loans and PDLs, I would not have used PDLs. Now, as the goalposts have moved, I lose out for 6 years. How is that fair?

If i was a lender i would run a mile..you have no grasp of money management and think you should spend more than you earn..

rtho782

geoffky wrote: »

If i was a lender i would run a mile..you have no grasp of money management and think you should spend more than you earn..

Completely within your rights of course

I pay all my debts however, and am slowly reducing them, I should be debt free in about 2 years, so I'm certainly not spending more than I earn. Over the last 6 months I've reduced my outstanding debt by about £3000.

chanz4

No my point is that they are creating a group, what if they had a perfect record but a payday loan. Means nothing, as it could of been down to something like the rbs issue.

It will be just any excuse to wack their aprs up

RobertoMoir

chanz4 wrote: »

No my point is that they are creating a group, what if they had a perfect record but a payday loan. Means nothing, as it could of been down to something like the rbs issue.

There's a difference between needing a short term loan to fix the car or deal with bank problems (though as a point, how would someone whose bank account was out of action actually receive a loan payout?) and living off dozens of them over an extended period of time. Hopefully a sensible lender would realise that.

chanz4 wrote: »

It will be just any excuse to wack their aprs up

Well that's up to the lenders isn't it? They're entitled to charge what they like for their product, we're entitled to take our business elsewhere if we don't like it, and the competitors to the "whack their APRs up" lenders are entitled to keep their offerings at a more competitive rate and make hay while the sun shines.

That's how business works, right?