Loan or 0% Credit Card?

Freddie_85

First of all, apologies if this type of query has been dealt with many times before but I feel such questions are entirely dependant on each individual's details... so here goes...

I am looking to purchase a motorcycle in the next month, and I will need around £5,000 to do this. Because I have some money saved, I am looking to get a loan of around £3,000 to £4,000, or possibly the full amount. It's more a case of wanting to purchase the bike now rather than wait until I can pay for it in cash (maybe 6 months from now... i.e. the onset of winter!).

From 2010 to the end of 2012 I attended university and was unemployed during that time. However, since the start of the year (4 months now) I have been working full time, with an annual income of around £18,000.

I use my credit cards for absolutely everything, from expensive purchases such as flights, to buying a single doughnut from Greggs. I have never missed a single payment and pay my bills off in full every month. My credit score is around 480 and I have no nasties on my credit rating (defaults etc.). I'm not sure however, if that figure is considered 'Good', 'Fair' or 'Bad' when looking to get credit.

I live with my parents, and I also live with a brother whose credit rating is not the greatest, although I am not sure how relevant this is.

My question: Because I have only been employed since the start of the year, is there any chance of me getting a 0% credit card that will last at least 9 months? I would need a decent credit limit and would probably have to pay a small fee to purchase a vehicle using a card anyway.

Similarly, is there much chance of me securing a loan? Given my income, the period in which I have been in work, and the fact that I live with my parents?

I would have every intention of paying it off in full before the end of the year but right now I am worried about making multiple unsuccessful applications which would have an adverse effect on my credit score, so any help would be great!

Thanks!

poppasmurf_bewdley

Having only been in employment for a short time, you may get an offer of a credit card, but whether it will have an interest free period is debatable.

And I think you will be very lucky indeed to be offered a credit limit of anywhere near £5k. More like £1k.

Kayalana99

Last time I checked my credit rating was in the 750 area and I am young & had no credit card at this time/or loans paid off.

450 to me is pretty low as I am in the idea that 750ish was right in the middle? Or maybe im complety out of it 2night :-)

gb12345

Kayalana99 wrote: »

Last time I checked my credit rating was in the 750 area and I am young & had no credit card at this time/or loans paid off.

450 to me is pretty low as I am in the idea that 750ish was right in the middle? Or maybe im complety out of it 2night :-)

Let's all play "compare meaningless random numbers", because that is what you are doing - the credit score is a number that means nothing to anyone except the agency you paid for it.

Freddie_85

Ah I see, I didn't realise the credit score was not universal. The quoted score of 480 was from Equifax and according to them, it is in the 'Excellent' range. The report states that I would be a 'strong candidate for credit'.

I used the MoneySupermarket smart search tool and according to them I would have an 80% chance of securing a £7,500 loan from Co-Op at a rate of 5.5%. Not sure how accurate this is though, or whether that interest figure is to be trusted. For reference, I was given only a 50% chance of securing a loan from Zopa.

My biggest concern is that I'm worried about applying and failing. My credit rating is unblemished at present. So, just how bad a mark on the rating is a failed loan application?

Even if I am accepted, will having a loan automatically have a negative effect on my rating, or can it actually be a good thing? I will never miss a payment and it's highly likely it will be paid off early.

Thanks.

You-kip

Freddie_85 wrote: »

Ah I see, I didn't realise the credit score was not universal. The quoted score of 480 was from Equifax and according to them, it is in the 'Excellent' range. The report states that I would be a 'strong candidate for credit'.

I used the MoneySupermarket smart search tool and according to them I would have an 80% chance of securing a £7,500 loan from Co-Op at a rate of 5.5%. Not sure how accurate this is though, or whether that interest figure is to be trusted. For reference, I was given only a 50% chance of securing a loan from Zopa.

My biggest concern is that I'm worried about applying and failing. My credit rating is unblemished at present. So, just how bad a mark on the rating is a failed loan application?

Even if I am accepted, will having a loan automatically have a negative effect on my rating, or can it actually be a good thing? I will never miss a payment and it's highly likely it will be paid off early.

Thanks.

You wouldn't ever know your credit score as its private only to a lender when accessing an application which you pass their scoring or you don't.

Just take NO notice whatsoever with scores that CRAs sell you as they don't mean anything.

Freddie_85

Okey doke, I will pay no attention to the credit score.

The facts are:
I have two credit cards with a total credit-limit of £3,350
I use my credit cards for everything
I have never missed a credit card payment
I pay the bills off in full every month
I have a current account with a £1,250 interest-free overdraft
I am not currently making use of my overdraft (no debt)
I have almost £0 outgoing (no rent and negligible direct debits)
I have not applied for credit for years
I earn around £1,250 per month, post tax
I have been employed for four months
I live with my parents
I am on the electoral role (etc.)

Based on those facts, do you think I stand a realistic chance of securing a loan (from £4000 to £7500)? And if so, is it worth applying for one with a competitive interest rate (5.5% to 7%)?

Thanks for the help.

stu2500

Freddie_85 wrote: »

Okey doke, I will pay no attention to the credit score.

The facts are:
I have two credit cards with a total credit-limit of £3,350
I use my credit cards for everything
I have never missed a credit card payment
I pay the bills off in full every month
I have a current account with a £1,250 interest-free overdraft
I am not currently making use of my overdraft (no debt)
I have almost £0 outgoing (no rent and negligible direct debits)
I have not applied for credit for years
I earn around £1,250 per month, post tax
I have been employed for four months
I live with my parents
I am on the electoral role (etc.)

Based on those facts, do you think I stand a realistic chance of securing a loan (from £4000 to £7500)? And if so, is it worth applying for one with a competitive interest rate (5.5% to 7%)?

Thanks for the help.

Go to your bank first and see if there are any 'pre-approved' loan offers where they can advise you of the interest rate before hand. Barclays are able to advise me what lending is available to me (interest rates/duration/amount of loan) prior to being credit scored.

Freddie_85

Thanks, I will do that, although I think they (Natwest) will try to flog me their graduate loan and its minimum interest rate of 18%. I will also try Nationwide's soft search to gauge an idea of where I stand.

Reading through this forum, it seems the general consensus is that lenders will only lend half your salary. So if that is the case then am I right in thinking I should be allowed around £4000?

Half of £18,000 = £9000, minus £3000 (credit card limit), minus £350 (second credit card limit), minus £1250 (current account overdraft) = £4400

Does it matter if I have spent money on my cards recently and therefore making use of my credit? The money will be paid off in full long before the due date but I'm wondering if I would have a better chance of securing a loan if £0 is due.

Does the choice of loan duration matter? Given that I will be paying off the loan early would I be more likely to be accepted if I request a short or lengthy repayment period (eg - 24 months vs 60 months)?

Also, while I'm here, regarding my annual salary... I work shifts and I am paid weekly. My pay is different each week as it is affected by bonuses and extra hours (always at least 37.5 hours per week though).

How will the bank determine my annual salary based on this information, will they simply take an average from, say, the last three payslips, or will they need all of my payslips from the beginning of the year?

Thanks