Declined for mortgage earlier this year - should we try again?

Strauss

Please be gentle for my first post

In January my husband and I applied to extend our current mortgage from £155k to £170k with a view to putting an extension on our house. Our lender, Santander, turned us down but not before getting us to renew our existing mortgage with them and tying us into a 2 yr deal with a £4.5k ERC. I complained at the time as they led us to believe that there would be no problem with the additional borrowing so renewing our existing mortgage was just a formality. They also rather conveniently seemed to process the renewal twice as quickly as the extended borrowing application. They refused to waive the ERC, or to explain why we were declined, although they paid £60 compensation. We gave up on the idea of extending.

Now, 10 months later we have seen a house we are interested in buying. I rang Santander to find out whether its worth our while applying to port and extend our mortgage given what happened earlier in the year. I've now been told we were declined in Jan due to the credit score via Experian. I have my Credit Expert account and it is showing as "excellent" - no defaults, no missed payments, no CCJs etc. My husband is in the process of getting his report but he also has no poor credit history. I've explained this to Santander who just keep repeating that we were declined due to credit score, without giving any more detail.

My quandary is how do I improve our credit score in Santander's eyes if it is already showing as "excellent" and they will give us no more detail on what they believe is wrong with it?

We both have cars on a lease scheme (each £300 a month) and between us credit card debts of £18k which we are paying down rapidly and never missing payments on. Our joint income is £95k. We want to borrow £275k on a house worth £325k so 15% deposit. They knew these details before doing the credit search so surely could have told us if they felt our unsecured lending was too high?

I'm nervous about applying again, but would rather avoid the ERC so staying with Santander seems the least worst option. Should we give up on the idea of moving? Can we force Santander to give us more detail on what is wrong with our credit score? I'm frustrated that experian describe it as excellent yet santander use it as the reason to decline us. Your advice would be much appreciated - sorry for the longwinded post.

kingstreet

A product transfer can normally be done instantly with just a confirmation letter to follow, explaining the new details. An application for additional borrowing is underwritten like a mortgage. A difference in the time taken to process these items is understandable.

Get your credit files from all three CRAs, not just Experian. This will provide a clearer picture of both of you, so you know what you can and can't do. The £2 paper copies are fine for this purpose.

When they say "credit score" it doesn't necessarily mean they've found adverse credit information on your file. It may mean the sum total of the information you've provided doesn't meet their criteria for a new mortgage because you don't have enough "best" answers to the questions.

Santander's idea of excellent and Experian's is different. Santander ask you things Experian have no idea of. A man with a 999 credit score with Experian may have no job and be unable to qualify for a mortgage.

Your credit commitments are taking around £68k out of your borrowing power and the combination of this, together with the high loan to value you need, won't be helping. You'd normally be able to borrow around £325k, but then need to deduct the cost of any dependents, maintenance and possibly other fixed outgoings. If your mortgage term is shorter, this may also adversely affect affordability.

Have a play around with this;-

http://www.abbeyforintermediaries.com/calculators/affordability.aspx

and let us know what the figures are you get back.

Strauss

Hi Kingstreet, thanks for the reply. I have both Experian and Equifax - both show no issues. Just waiting for husband's although he also has no defaults etc.

i understand that our credit commitments affect our affordability, but Santander have said that our affordability is not an issue. It was Santander who told me to refer to Experian when I questioned them yesterday on what was wrong with my credit score - they told me that they use Experian and that Experian would be able to help me! Theyve refused to give me any other information. Santander were very clear that their decision was based on the Experian credit score, not any other information, which is why I'm so confused and frustrated.

Not sure where you got £68k credit commitments from - including the cars it's £44k max. We have no dependants and no other fixed outgoings. The term we want is 25 years. Based on that info, would you suggest we try elsewhere, try again with Santander, or give up?

Thank you for your help - I've just looked at the website you linked to which suggests a min lending of £377k for a 'low scoring applicant' and £438k for a 'high scoring applicant'.

Simon_gloster

It seems you dont meet the minimum score.

As king says, its not just your credit score or repayment history that drives the decision. Age, occupation, time with bank among hundreds of other questions form the lending decision.

Lenders will not publisise their lending models for obvious reasons, and if they did it is so complex even those that build them are highly skilled people working with multiple lending outcomes.

Strauss

Simon, thank you for your reply. Are you able to answer the questions in my post too? Why, if we don't meet their overall internal scoring criteria, would they tell me that it was based on my credit score and refer me to Experian? Given that this is a different application for different purposes 10 months later is it worth applying again? Do you think we should try elsewhere? Or based on the information I've posted does it look as if no lender would give us a mortgage?

For reference we have another 25-30 working years ahead of us, have held our mortgage with Santander for 5 years, never missed a payment and bank with them too.

I don't want to know their lending model, but I do think its fair to want to know specifically what they believe is wrong with my credit score so that I can take action to correct it. Surely that isn't unreasonable?

Dave_Ham

Ok, bit late to the post but here goes.

Santander are a nightmare at the moment, changing criteria, policy, deals and offers and genuinely are struggling to be clear, concise and timely.

What rate are you currently on with Santander?
Does the ERC reduce at the end of year 1? (Your paperwork will tell you this answer on the mortgage offer or key facts illustration)
Are you on a repayment mortgage (If not, you will need to factor this in as interest only are now extinct at most loan to value levels)

Kingstreet was not referring to your level of debt in my opinion, rather the lending amount that having the financial commitment will be costing you. For example, say a lender will lend 4.5 times joint incomes - commitments then the amount given was resulting 4.5 times - this amount from the amount they will lend. Apologies, I am rubbish at explaining this through typing - where are Kingstreet and Holly when you need them???

Onto Experian, as stated forget the scores but you need to look through them and also that of linked and previous addresses. If something comes up in the 3-6 year history at another address with adverse it may not be visibile on Credit Expert, but will be to the lender.

Have either of you experienced difficulties in the last 6 years?

Santander used to overlook previous adverse marks, so long as recent behaviour was good but they stopped this in January this year. You therefore may have previously been ok for a mortgage and not now.

None of this precludes you from going to another lender, but you may want to consider engaging a broker to firstly ascertain the issue and secondly find a solution.

All the best

kingstreet

Strauss wrote: »

Why, if we don't meet their overall internal scoring criteria, would they tell me that it was based on my credit score and refer me to Experian?

You are wrongly thinking Experian calculates your credit score and tells Santander. That is not the case.

Santander seeks information about you from Experian, and from you, via the application you complete. Santander's black box then analyses the information and reaches a "score" which it compares with the Santander model. It is Santander's system which decides if you get a mortgage.

Lenders suggesting you contact a CRA because you failed the "credit score" can often be disingenuous. It's easier for them to do this than explain how their system actually works and its vagueries. Often, lender employees do not actually know why you were declined and they are instructed to refer to the CRA as a matter of policy. In addition, the lender may simply have no appetite to lend, or the score may have been set higher at that time because it had better products which would increase its application flow.

You need to obtain your credit files from Call Credit too. There may be nothing on there different to the others, but we have seen cases where the data varied across all three and the borrower had no idea what the lenders could see.

My calculation suggesting you were losing over £60k from your borrowing power is worked out by taking £600pm for your cars, £540 (3%) for your credit card minimum payments and adding them together and multiplying by 12. If you then multiply that figure by 5, Santander's maximum borrowing income multiple, the "cost" of those credit commitments is £68,400. This may not be the reason for your decline, but TBH we're working in semi-darkness trying to speculate on what might be...

I would wait until you have all your credit data in your hands then have a chat to an independent or whole market mortgage broker. He may be able to set out a timescale in which a new application to Santander might have a better chance of success.

Was typing this while Dave was posting.

Strauss

Hi Dave and Kingstreet, thanks again for taking the time to comment.

Dave - we have no adverse credit history, are on a repayment mortgage the ERC is 3% of balance until Jan 2014. Rate is 3.79% so hard to beat. There are no odd linked addresses to my credit file - we're waiting to see my husband's but as he's only ever lived at 3 places in his 37 years I can't see that there would be.

Kingstreet - I do get the fact that Experian don't determine my score. Which is why I am so perplexed as to why Santander would be so insistent that I contact Experan rather than ask them for the detail on them turning us down in January. I would agree that it sees they are fobbing me off by referring me to Experian rather than explain their decision. However, I can only go on what they tell me and they did tell me that they based their decision on the Experian report. Yes, it's probably an ill informed phone advisor, but very frustrating nonetheless :-)

I have been speaking to a whole of market advisor who has also said that santander are being obstructive at the moment. She rang this evening to tell me that Halifax will approve us, which is great news. Obviously ths does leave the ERC to pay and I'm now seriously considering referring to the ombudsman because I believe santander tied us into our deal under less than honest circumstances. Wish me luck & thanks again for all of your help.

Thrugelmir

Strauss wrote: »

Obviously ths does leave the ERC to pay and I'm now seriously considering referring to the ombudsman because I believe santander tied us into our deal under less than honest circumstances.

I suspect that you'll struggle to make any headway with this.

and between us credit card debts of £18k

This is where your problem lies. Whatever your own perspective of your credit rating. A lender will take a totally different view.

Was the level of unsecured debt higher than this in the past? As internal scoring systems will severely mark you down on this. As credit conditions have tightened, Then lenders have correspondingly adjusted to filter out applications, and therefore business they have no interested in underwriting.

Experian_company_representative

I suggest you send the lender a copy of your credit report and ask them to point out what they weren't happy with. They should be able to do this for you.

James Jones