Blonde moment re credit file/score

IsoChick

OH and I have recently been turned down for a loan by our own bank (for some home improvements). They said that it was nothing to do with our credit score, but with our 'account management' - after some investigation, this turned out to mean that they took exception to the fact we have (and go into slightly) an agreed overdraft (have had this for about 6 or so years with them).

We do already have a loan with our bank, and the new loan would basically have been a re-finance, but free-ing up about £5k for the building works (we have £2k saved up to add to this). It would have been an increase of £13 per month on our existing payment.

Since looking at our credit files (which seem ok, all payments up to date etc, several debts settled in the last year) I suspect the decline might be to do with our amount of debt vs what we earn.

Can anyone give me the formula/explanation of how they work it out please? Combined, we earn £87k before tax, but do have quite a bit of (manageable) debt.

Tixy

If they are saying its down to account management then I would guess that it is exactly that.

In terms of looking at a new lender the rough often quoted guideline is its harder to get new credit that would take you above 50% of your earnings.

Obviously refinancing with your own bank they would only be looking at an overall £5k increase in your debt, but any other bank will view the whole of the new loan as additional to your existing debt.

The_Boss

They are right in that it's not down to your credit score as you do not have a credit score.

As above, lenders will rarely want to give more than 50% on an unsecured loan (or most secured ones even, with the obvious exception being mortgages). So if you code that you want £10k and your salary is £19k (for example), then the lender's process would either eliminate you from consideration or score your application accordingly. Debts will also be taken into account.

Obviously the above example would not apply to you. Generally, we cannot say what the formula is because each lender will score your application and credit file data differently. But one of the few useful things Martin Lewis advised of in the credit file episode of his show was that applying through your bank can be a good thing because they know your account behaviour, or it could be a bad thing...because they know your account behaviour.

You-kip

Not the old "we've gone into our agreed OD statement again" its nothing to do with you've gone into your agreed limit its about your Current Debt..

Me & my OH often pop into our overdrafts and made no difference to us both getting loans as our current debts are very low.

IsoChick

Thanks!

I wish the bank were clearer and just said "we think you've borrowed enough, thanks" rather than waffle on about our account management...

When I did mention the bit about the OD being an agreed one, and if they didn't want us to have it, they should ask us to pay it back, the response was "Oh, that's the personal banking section's decision; we're the loans section"....

You-kip

IsoChick wrote: »

Thanks!

I wish the bank were clearer and just said "we think you've borrowed enough, thanks" rather than waffle on about our account management...

When I did mention the bit about the OD being an agreed one, and if they didn't want us to have it, they should ask us to pay it back, the response was "Oh, that's the personal banking section's decision; we're the loans section"....

You'll find most Bank Employes including Branch Managers can be very clueless where lending decisions are made and most of make it up as they go along as they wouldn't have a clue why you were turned down as its computer scored.

TBH most customers not saying you believe because they work in a Bank they should know why people get declined but they haven't clue.

The_Boss

You-kip wrote: »

You'll find most Bank Employes including Branch Managers can be very clueless where lending decisions are made and most of make it up as they go along as they wouldn't have a clue why you were turned down as its computer scored.

TBH most customers not saying you believe because they work in a Bank they should know why people get declined but they haven't clue.

Agreed. Plenty of examples from people on here, including those who have taken their credit report to a bank manager and them being "perplexed" as to why they were refused credit.

Thrugelmir

IsoChick wrote: »

I wish the bank were clearer and just said "we think you've borrowed enough, thanks" rather than waffle on about our account management...

The bank is under no obligation to tell you the precise reason for the decline. Nor are banks in the business of giving debt advice.

If your household income is as stated. Then suggest you review your outgoings. As from a banks internal perspective their concern is that one day the wheels are going to fall off your wagon. That manageable debt will soon become unmanageable to service.