Why do companies think my financial circumstances have changed when they haven't?

damo24

Due to circumstances beyond my control in 2008/9 I lost my job and ended up in severe debt.

Although I am currently unable to work due to disability I have worked hard to try and improve my credit rating and make payment arrangements with debt collection agencies. Due to my circumstances, these payment arrangements are currently a token payment of £1 per month to be reviewed as and when my circumstances change.

I have followed the advice of both MSE and others on how to improve my credit rating which has included getting a Capital One credit card, only using it for things I could afford and paying it off in full each month. Over time, my credit limit on this card was gradually increased to a limit of £1,400 in February.

Suddenly last month Capital One informed me that they were increasing my credit limit to £2,000 and Next informed me that they were increasing my credit limit from zero to £3,600.

Today I have received a letter from a debt collection agency stating:

We have recently been advised by Call Credit a credit reference agency of an improvement in your financial situation and therefore conducting a review of your account (sic)

My financial situation has remained unchanged for more than 18 months and only last week I checked my credit report with Noddle (Call Credit) and everything on there is correct.

I have asked the collection agency of details of the "improvement" that they have been advised of however I am not holding my breath.

Does anyone have any ideas what might have given the collection agency as well as Next and Capital One the impression that my circumstances have improved?

Tixy

Have you checked copies of your credit files? and has anything changed on there - such as any old defaults/accounts fallen off or maybe even a creditor marking your account as settled (perhaps because they have sold it on to a new debt collector).

It could just be the increase in the capital one card limit that has triggered this letter.

I wouldn't bother asking the debt collector why they think there has been an improvement, just write back to say your financial circumstances remain unchanged, you are still only in receipt of benefits and you are still only able to afford £1 a month.

matttye

Agreed with Tixy, it's likely that because your credit files have improved and companies are offering higher credit limits, the DCA thinks that your financial situation has improved.

Capital One probably just increased your limit because you've been paying in full every month and they've deemed you a low risk to lend to. You can ask companies to lower your credit limits if you want.

Thrugelmir

damo24 wrote: »

Does anyone have any ideas what might have given the collection agency as well as Next and Capital One the impression that my circumstances have improved?

The amount of spend on the credit cards perhaps. As £1 is a mere token payment.

The_Boss

Thrugelmir wrote: »

The amount of spend on the credit cards perhaps. As £1 is a mere token payment.

Yep, this will be it. And fair enough too.

matttye

The_Boss wrote: »

Yep, this will be it. And fair enough too.

I don't like this line of thinking.

If you pay off a credit card in full every month, you're really only spending your own money. The OP could be using his credit card to buy food.

Thrugelmir

matttye wrote: »

I don't like this line of thinking.

If you pay off a credit card in full every month, you're really only spending your own money. The OP could be using his credit card to buy food.

Welcome to the real world. Where not everybody is honest. Terrible thing to say I know. But it's true.

Lidl and Aldi (to name 2 cheaper retailers) only accept debit card.

The_Boss

matttye wrote: »

I don't like this line of thinking.

If you pay off a credit card in full every month, you're really only spending your own money. The OP could be using his credit card to buy food.

It's more that they would be able to see the balance history. That can spot a trend in how much is being spent. If that has increased then you can see why they would want to review the agreement.

matttye

Thrugelmir wrote: »

Welcome to the real world. Where not everybody is honest. Terrible thing to say I know. But it's true.

Lidl and Aldi (to name 2 cheaper retailers) only accept debit card.

Tesco/Morrisons/Sainsbury/Waitrose/Asda/Coop/Heron/many more, however, DO accept credit cards.

The_Boss wrote: »

It's more that they would be able to see the balance history. That can spot a trend in how much is being spent. If that has increased then you can see why they would want to review the agreement.

Some people don't like to spend too high a percentage on their credit card, so an increased limit could explain an increased spend.

Whichever way you spin it, the DCA is making an assumption that because spending on the card has increased, the OP's finances have improved. Here's a simple way of showing why that isn't necessarily the case.

Scenario A:

- Spend £100 on food using debit card.
- Spend £100 on food using credit card.
- Pay £100 off credit card on due date.

Scenario B:

- Spend £200 on food using credit card.
- Pay £200 off credit card on due date.

Clearly the same amount of money is being spent, and it would be a silly assumption that finances have improved in scenario B.

The_Boss

matttye wrote: »

Whichever way you spin it, the DCA is making an assumption that because spending on the card has increased, the OP's finances have improved.

Or that instead of spending more on day to day, they could instead be spending more on paying off the debt.

I can still understand why they would like a review, but if the circumstances haven't changed and the OP proves that then there is no reason why things will change. It's only a review, based on evidence they have seen; there's no demand for additional payment.

matttye

The_Boss wrote: »

Or that instead of spending more on day to day, they could instead be spending more on paying off the debt.

I can still understand why they would like a review, but if the circumstances haven't changed and the OP proves that then there is no reason why things will change. It's only a review, based on evidence they have seen; there's no demand for additional payment.

Another assumption because they only get to see the balance, not what it's spent on.

There's no demand for additional payment but they have indicated he has 'an improvement in his financial situation' which is, again, an assumption.