Credit Scoring - doesn't keep up with the times

cybermat

Hello All

I work full time now and I earn 25,000 a year but just after leaving Uni 5 years ago I had a couple of debts, one default and a few lates.
These are still on my credit report now, though I paid back all monies plus interest at the time - I have never not paid back a debt and everything has a settled at the end of the report.

In recent times I have tried to get a 3k loan for a better car than the one I currently own but when doing a minimal search on sites such as moneysupermarket it tells me that I am unlikely to get the loan based on my credit rating.

First off the monies that were late payments were not large sums - we are talking 200-300 pounds at the most, plus this was a time when I had just left University and was on my bones.

Several years later I have worked hard to get up the ladder at work and have a pretty decent wage for the day and age.
Still however I am looked upon as a poor debtor, even though I have years of good credit on things like my mobile contracts and my loan from my bank (never missed a payment or been late once). The unlikelihood of being accepted has put me off from even applying for the loan and I will instead just save and keep my jalopy a bit longer.

there is certainly a flaw somewhere though as the data on the credit report does not move pace with the times. Just because you were broke in 2008 does not mean that you are still skint in 2013 and not worthy of consideration.

Surely such a system needs a tweak of some kind as it seems a little 1990's rather than modern times.

Anyway I'd best clear off and get saving as my 5 year old information reckons I am not good for a 3k loan

matttye

The default will drop off next year (6 years from date of issue) and your chances will improve substantially.

As for the late payments, they will drop off next year if the account is still open, but if it's closed it will be 6 years from the closure date.

I agree with you, but the finance industry seems to have settled on 6 years as the amount of time it takes to recover from defaults and the like. You have to remember that the company lending money lends to millions and doesn't have time to personally consider each person. They have to project risk through credit scoring, which might explain why they err on the side of caution!

RuFFCuT_RetRo

I had the same problem - kind of annoying that some financial difficulty I had 4 years ago can affect me today. However I'm grateful it happened while I was younger so by the time I apply for a mortgage it should have been taken off!

sharpy2010

6 years is just too long for credit data to affect someone. Like the OP says, their circumstances in 2008 are totally removed from 2013, so why should it affect them now?

matttye

sharpy2010 wrote: »

6 years is just too long for credit data to affect someone. Like the OP says, their circumstances in 2008 are totally removed from 2013, so why should it affect them now?

How can you put a time limit on it though? You could get into debt if you lose a job, then pay it all off when you get a new job the following week. Should the defaults be wiped because your financial situation is different?

I think bad debt is (not always but often) a strong indicator of bad financial management. For example, I got into debt when I lost my job, but I had been working for almost a year and had no savings to fall back on. That was my own bad planning and could've been avoided.

I appreciate not everyone has enough money to live on and save as well, but you shouldn't take out credit in those circumstances.

cybermat

I'd say three is probably enough and even that seems steep in a fast moving society like we live in today.

six years ago I struggled to top my mobile up with 5 pound top up to keep it going, now I have two mobile contracts both at around 45 pounds each and never miss a payment - never have.
whilst a student I worried if my rent rose by a few quid in April, now they could double it and i'd manage - albeit a bit cheesed off.
whilst a student I couldn't afford a car but I now have two classics and a daily Jalopy.

I was just looking at upgrading my daily to something a bit better but stuff it Ill save instead...

still quite a poor show though, the credit system certainly needs a bit of a spring cleaning and bringing into the 21st century.
Looking at six year old data as a guide to today is pretty dumb, I wouldn't survive long on the stock market following those kind of rules !

matttye

cybermat wrote: »

I'd say three is probably enough and even that seems steep in a fast moving society like we live in today.

six years ago I struggled to top my mobile up with 5 pound top up to keep it going, now I have two mobile contracts both at around 45 pounds each and never miss a payment - never have.
whilst a student I worried if my rent rose by a few quid in April, now they could double it and i'd manage - albeit a bit cheesed off.
whilst a student I couldn't afford a car but I now have two classics and a daily Jalopy.

I was just looking at upgrading my daily to something a bit better but stuff it Ill save instead...

still quite a poor show though, the credit system certainly needs a bit of a spring cleaning and bringing into the 21st century.
Looking at six year old data as a guide to today is pretty dumb, I wouldn't survive long on the stock market following those kind of rules !

The 6 years is more to do with attitude than financial position I think. You may be more well off after 3 years but has your attitude changed? I think that's why they stay for 6.