Can't understand my credit score

izzy58

I have recently been refused an unsecured £8k car loan, and having never been refused credit before, I decided to check my credit score with Experian. I was shocked to find that my score was 567 (Poor). I have an excellent credit record and have never defaulted on any payment. I have a regular income (£34k), am a homeowner, lived in same address for more than 3 years, used same bank for 17 years. I have two credit cards, one with balance of £0 and the other £750. My Mortgage is £65K and I have an existing car loan of £3k which I wanted to pay off using some of the new loan. I did take out an unsecured loan for £24k with NR last year over 10 years for home improvements, rather than secure it against the property or re-mortgage - Am I being penalised for this?

tom188

almost nobody uses these scores, and nobody uses them on their own. they are a cynical profit generating product from the cras which are used to prey on the insecure, and tell you nothing you cant work out on your own thinking about your payment history and looking at your credit file.

Key criteria you actually need to consider and which are not taken into account in these "scores" are
Affordability - how much do you owe, how much disposable income do you have?
Stability - how long have you been in your job/same address?

Also
How many applications have you made? Many - bad.
How much credit history do you have? Little - bad.
Have you missed payments on this credit? Some -bad.

etc...

tom188

I think the answer is that you have £27.75k unsecured debt to your name, which is over a years salary for you, and with a mortgage on top of this. Therefore it is likely you will fail the affordability criteria from lenders - they will see you as over committed.

However the score you purchased will not have taken this into account. therefore do not take much notice of it.

YorkshireBoy

Do you share a financial association with anyone else, either through the mortgage, the loan, or a current account? Do they have your level of debt and/or a poor credit rating?

What are the credit limits on your two credit cards?

Why didn't you re-mortgage last year, instead of taking the loan? After all, the value of your property should have increased significantly over the preceding two years, and £24K of home improvements must increase it's value still further (if indeed it was all spent on the property and not debt consolidation/luxuries?).

To answer your last question, yes I do think the existing £24K unsecured (or otherwise) loan has played a significant part in your rejection. Had this been put on your mortgage, then I'm sure it would have been viewed differently by lenders...providing there isn't anything else that you haven't told us about.

izzy58

Thanks all for your responses. In terms of affordability, I would have no problem in making the repayments; in fact they would be less per month than I'm paying on my current car loan. My wife is a joint Mortgage holder, and like me has an excellent credit history for 18+ years. I have taken approximately 10 loans out in that time and never defaulted on a payment. My credit cards have limits of £5000 and £10000. The one with £0 balance I am going to cancel as I do not use it. The reason I took an unsecured loan for the home improvements was that I managed to get a great deal of 5.6 APR with Northen Rock over 10 years, which only works out at £270 a month, which is again affordable to me. However, if I had known that this was going to be so unattractive to lenders, I would have re-mortgaged instead!