How to make yourself look 'profitable' to a lender

Stephen_C.

In the MSE credit report/score guide, there is a small section explaining how your likelihood of being profitable to a lender is as important as risk.

Credit scoring's about profit, not risk...

This is so important, let's make it as clear as possible.

Even good risks can be rejected, simply because they won't make the bank money!

Banks pick customers for their own good, NOT yours, so the credit check process is about profit, not risk. Of course, risk plays a part, as those unlikely to repay are a threat to profits.

Yet even the most solvent may be rejected if they're unlikely to act in a way that'll generate profit for lenders.

It doesn't go on to say how you can achieve this. I have direct debits set up to pay my cards in full and have never borrowed on them - does this make me unattractive to lenders? What actions should I take to I appear a profitable customer and low risk?

YorkshireBoy

For purchase cards, a high spend each month and full repayment means they'll make money on their slice of the 2% (or whatever) fees for very little outlay.

If they can get 1% a month that's circa 12% per annum gross margin...for very little risk (because your credit history shows you've always done this the likelihood is you'll continue to do so).

Thrugelmir

to pay my cards in full and have never borrowed on them

So why would you require another one?

rb10

The MSE article is wrong. Credit scoring is all about risk.

Stephen_C.

Thrugelmir wrote: »

So why would you require another one?

To benefit from rewards...

[Deleted User]

Using your card to pay for everything you can (even a couple of pound transaction in Tesco) and paying off in full each month is the best way to make yourself seem attractive to the right sort of lenders.

I'm sure that some so-called sub-prime cards like their customers to carry a balance each month but they have a completely different business model (and target audience) than the mainstream lenders.

Thrugelmir

Stephen_C. wrote: »

To benefit from rewards...

Then close down the ones you have no need of.

iAMaLONDONER

YorkshireBoy wrote: »

For purchase cards, a high spend each month and full repayment means they'll make money on their slice of the 2% (or whatever) fees for very little outlay.

If they can get 1% a month that's circa 12% per annum gross margin...for very little risk (because your credit history shows you've always done this the likelihood is you'll continue to do so).

It's working! Albeit slower than I'd have liked!

Stephen_C.

YorkshireBoy wrote: »

For purchase cards, a high spend each month and full repayment means they'll make money on their slice of the 2% (or whatever) fees for very little outlay.

If they can get 1% a month that's circa 12% per annum gross margin...for very little risk (because your credit history shows you've always done this the likelihood is you'll continue to do so).

Thanks for the advice. Doesn't a high spend go against conventional logic that a high credit utilisation ratio reflects badly?