Halifax Clarity Card - Please read and help me make the OFT aware of this issue!

sarumane

Hi All

I took out a Halifax Clarity Card as it often appears in Martin's top picks for using abroad.

Every holiday, I took my card and withdrew cash, repaying in full on return. I must say that the product is excellent and the rates and exchange rate are great. In January, I did a big trip and took over £1000 over ten days. Halifax dropped my credit limit to just above my balance. They wouldn't tell me why and eventually my credit limit was restored to a third of what it was. They did this on the last day of my trip and I was just lucky I didn't need any more cash.

In April, I was again on holiday in the UK and withdrew cash. They dropped my limit. They were quicker at restoring it this time but again it was to the lower level.

I spoke to a friend who works in the industry and they immediately stated 'That will be your Delphi score'. Apparently, there is a computer algorithm built into credit scoring that works out your likelyhood to default and one of the risk indicators is choosing to withdraw cash from a credit card.

I contacted the Ombudsman and OFT. I highlighted that removing cash - fee free and at their best exchange rate was surely a benefit of the card and I did not see why I should be penalised fo this. The Ombudsman was useless, stating that it was part of credit scoring so they could not comment. The OFT stated that they did not deal with individual cases.

My friend also told me that it would affect not just my profile with Halifax, but with everyone. I then applied for a number of financial products to compare the rates I got compared to last year. I would add that my financial peosition is stronger this year, with no other adverse information and reducing loan balance paid on time.

Last year I was offered 0.3% BELOW Tesco's headline rate, this year I got offered 9.9% when the rates were 6.1%. Sainsbury's 9.9% compared to 6.4%. Zopa accepted for a loan, this year declined.

I have noddle for accessing my credit report and I noted that theit guidemark score of me went from 5/5 to 3/5.

I suggested to Halifax that they might want to consider reporting the product on credit files as a revolving loan to avoid this problem. They weren't interested, although they did acknowledge that it was likely that their computer kept lowering my limit because I was removing cash from the card, calling this an unexpected side effect. They also suggested that I don't remove cash, but were unable to say why they made it a benefit of the card but did not tell customers that it would ruin their credit score. As there is no charge for cash withdrawals and it is at the same interest rate, the card is clearly making withdrawals on a close par to transactions (minus the interest free period).

I write all this as the OFT will look into it if it has affected more than just me. Maybe you have had a similar experience? If so please contact the OFT and Ombudsman to try and get this unfair practice changed.

Thanks

Saru

older_wiser

interesting post

we all know that taking cash from credit cards is a big negative on your credit report but i would have assumed halifax had a different scoring system as this is one of the main advantages of the card. I don't have a halifax clarity card i can understand why you are annoyed with the outcome.

chattychappy

older_wiser wrote: »

we all know that taking cash from credit cards is a big negative on your credit report

No we don't all know that. Whilst it's unlikely to be positive, I suspect its either ignored or only weakly negative - perhaps when combined with other factors.

I'm using Santander Zero all the time to withdraw cash overseas. I don't have any problems with limits being reduced etc.

older_wiser wrote: »

i would have assumed halifax had a different scoring system as this is one of the main advantages of the card. I don't have a halifax clarity card i can understand why you are annoyed with the outcome.

Well that's just life. Perhaps there is something else in the OP's profile/usage that Halifax are unhappy with. In any case, there is no right to credit - it can be taken away/reduced and that is something cardholders accept. I'm unhappy with the level of reporting that goes on - to me this is anti-competitive when competitors start sharing information. But the argument is that without this kind of sharing, lending would be tighter or less responsible when it does happen.

older_wiser

I always thought taking cash from a credit card was a sign of financial distress so thanks for the clarification. Perhaps santander have a different scoring policy to halifax or as you say perhaps its other things on the OP credit report thats giving halifax the jitters.

JimmyTheWig

sarumane wrote: »

My friend also told me that it would affect not just my profile with Halifax, but with everyone.

How is withdrawing cash on a credit card recorded on a credit report? It's not something that I do, so not on mine in any case, but I can't see where it would be marked.
I can imagine that reducing limit might put other lenders off to some extent, though.

I then applied for a number of financial products to compare the rates I got compared to last year. I would add that my financial peosition is stronger this year, with no other adverse information and reducing loan balance paid on time.

Last year I was offered 0.3% BELOW Tesco's headline rate, this year I got offered 9.9% when the rates were 6.1%. Sainsbury's 9.9% compared to 6.4%. Zopa accepted for a loan, this year declined.

I have noddle for accessing my credit report and I noted that theit guidemark score of me went from 5/5 to 3/5.

Maybe it was the number of applications that had this effect?

Th1984

@Jimmy the wig,

Pretty much all of my CCards report number of cash withdrawals and value of them to at least one of the agencies.

I juts got our Statuatory reports and they show a few cash withdrawals from years ago in the detail!!

Amazing what they keep and share on the CR files

YorkshireBoy

JimmyTheWig wrote: »

How is withdrawing cash on a credit card recorded on a credit report? It's not something that I do, so not on mine in any case, but I can't see where it would be marked.

This additional detail has been reported by many (most?) credit card providers for some time now. Experian have an example here...

http://www.experian.co.uk/downloads/consumer/YCREJul08.pdf (pages 16-17)

lisyloo

I draw out cash on holidays.
I recently got accepted for an Aqua (sub-prime) card whilst others with good credit ratings got turned down.
It's all guesswork but I think I got accepted because I take cash advances, so that is deemed to be perhaps someone who doesn't manage money well and might pay interest.
Nothing could be further from the truth, so I agree this information is being mis-interpreted, but I also agree with chatty chappy that it's entirely up to a lender how they want to interpret the information and credit is not a right.

callum9999

chattychappy wrote: »

No we don't all know that. Whilst it's unlikely to be positive, I suspect its either ignored or only weakly negative - perhaps when combined with other factors.

I'm using Santander Zero all the time to withdraw cash overseas. I don't have any problems with limits being reduced etc.



Well that's just life. Perhaps there is something else in the OP's profile/usage that Halifax are unhappy with. In any case, there is no right to credit - it can be taken away/reduced and that is something cardholders accept. I'm unhappy with the level of reporting that goes on - to me this is anti-competitive when competitors start sharing information. But the argument is that without this kind of sharing, lending would be tighter or less responsible when it does happen.

How? Halifax reporting monthly that I pay all my bills to them on time actually makes me a more attractive proposition to other companies... It's not anti-competitive at all.

rb10

An interesting post that raises some very relevant points about credit scoring techniques.

sarumane wrote: »

I spoke to a friend who works in the industry and they immediately stated 'That will be your Delphi score'. Apparently, there is a computer algorithm built into credit scoring that works out your likelyhood to default and one of the risk indicators is choosing to withdraw cash from a credit card.

In this case it won't be. The timescales are too short for Delphi to update. I expect that it's something that Halifax have triggered internally instead. Halifax manage their credit cards book very well, and very intelligently, so it wouldn't surprise.

Unfortunately the issue that is faced is that cash advances from credit cards are, in the vast majority of cases, a clear sign of someone in financial difficulty. So it is logical and prudent for a card provider to reduce the credit limit of a customer who they believe may be in - or approaching - financial difficulty.

But ... with the rise of cards like Halifax Clarity, Santander Zero, etc, there is a small volume of cash advances is just purely down to someone being on holiday.

In an ideal world, Halifax's scoring system would realise this, and not trigger a limit decrease where the cash advances only take place outside the UK, and all fall in a period of just 2-3 weeks.

In an even more ideal world, the data that is reported to Credit Reference Agencies regarding cash advances would only report cash advances where they took place in sterling, or over a prolonged period of time.

sarumane wrote: »

I contacted the Ombudsman and OFT. I highlighted that removing cash - fee free and at their best exchange rate was surely a benefit of the card and I did not see why I should be penalised fo this. The Ombudsman was useless, stating that it was part of credit scoring so they could not comment. The OFT stated that they did not deal with individual cases.

As you have found out, neither the Financial Ombudsman nor the OFT will be able to deal with this.

It's a business decision that Halifax have taken, and unfortunately it's probably not the best one. They are tarring all cash users with the same (poor) brush, which is not necessarily the best for their customers. Unfortunately, getting the message to the teams that set credit card strategies is near impossible. Any complaint letter to them would have to be very carefully worded. I would probably approach it less as a complaint, but more as a 'for your information', with enough technical detail for it to have a chance of bypassing the complaint/customer services teams and getting to someone who actually understands credit scoring.

sarumane wrote: »

My friend also told me that it would affect not just my profile with Halifax, but with everyone. I then applied for a number of financial products to compare the rates I got compared to last year. I would add that my financial peosition is stronger this year, with no other adverse information and reducing loan balance paid on time.

Last year I was offered 0.3% BELOW Tesco's headline rate, this year I got offered 9.9% when the rates were 6.1%. Sainsbury's 9.9% compared to 6.4%. Zopa accepted for a loan, this year declined.

I have noddle for accessing my credit report and I noted that theit guidemark score of me went from 5/5 to 3/5.

Impossible to state what has caused this, and whether any of these differences may be attributed to your foreign cash use. Credit scoring is a complex topic, and there are dozens of different variables that are input into generating your score.

sarumane wrote: »

I suggested to Halifax that they might want to consider reporting the product on credit files as a revolving loan to avoid this problem. They weren't interested, although they did acknowledge that it was likely that their computer kept lowering my limit because I was removing cash from the card, calling this an unexpected side effect. They also suggested that I don't remove cash, but were unable to say why they made it a benefit of the card but did not tell customers that it would ruin their credit score. As there is no charge for cash withdrawals and it is at the same interest rate, the card is clearly making withdrawals on a close par to transactions (minus the interest free period).

No chance of them displaying it as a revolving loan. It's a credit card, thus that's how it's reported.

The organisation that oversees credit scoring practices could probably do with looking at whether the current mechanisms for reporting credit card cash use are the most appropriate.

dalesrider

You use a credit card to withdraw cash......

While it maybe fee free, is it interest free? As cash = interest from day one.
A customer drawing large amount of cash in a short period will set alarm bells ringing.

Would have been better to do a cashline to your current account and using that to draw cash at a atm.