Credit Rating Housekeeping

Underscore

Hi all,

Bit of a technical question which may well have no firm answer (or if it does, the ppl who know may not be at liberty to disclose the answer....):

I am a property investor and am now up to 10 BTLs in my name, putting me out of the frame at the majority of lenders. Rather than pay TMW's top bat rates, the next port of call is purchasing in the wife's name.

I keep an eye on our Noddle reports as obviously our ratings are extremely important to us for our livelihoods! I very recently fell to 4/5 for the first time since I have been monitoring, and the wife was at 3/5.

We are both being penalised for having 0% credit cards that are almost maxed out. I've always looked at this as simply good housekeeping/good business but not stopped to think about the consequences/opinions of the lenders (since they don't look at percentages, just amount of debt and how close you are to the limit).

So, I've definitely not been as clever as I thought I was being! I just want to know, what percentage of your credit limit is OK to be outstanding before you are considered to be using "too much" of your allocated credit limits? I suspect it changes across credit reference companies? I've paid them down to get just under the 50% of limits - surely this is sensible enough?

(OH's other reason for being down to 3/5 is that the electoral roll is showing as "recently registered" even though we have been in our current house for nearly 5 years - looks as though when we got married she went on the roll as a "different" person - have any others had this issue when taking a married name - I've opened disputes but have no documentation other than marriage certificate - any experiences/suggestions appreciated).

TIA

Thrugelmir

Underscore wrote: »

We are both being penalised for having 0% credit cards that are almost maxed out. I've always looked at this as simply good housekeeping/good business but not stopped to think about the consequences/opinions of the lenders (since they don't look at percentages, just amount of debt and how close you are to the limit).

Lenders access a myriad of data from the CRA's now. This includes whether an account is 0%, if minimum only payments are made, credit usage/ borrowing trends over a 6 year period. So if debt is been rolled over this identifiable.

From a lenders perspective you have debt. Simple as that. When your application is processed this will be all be factored into any decision.

With lenders now under regulatory obligation to lend responsibly and on an affordable basis. The rules of the game are changing. Being highly leveraged with interest rate rises on the horizon is something that lenders will be clearly looking to identify. As the risk to lenders is almost certainly going to increase.

Underscore

Thanks. If they looked at the whole picture and understood it (which from working on the inside of one of the top 10 UK lenders, they don't do either) I wouldn't have any problems.

My overall gearing is my single most important metric (to me) - however, they won't be/aren't looking at this unfortunately, simply following the same stupid old rules. Would that you got any credit for flexibility - realistically (unless you get into portfolio arrangements which I don't particularly like) they are only looking at the standard cookie-cutter approach.

Does anyone have an opinion/educated guess on the percentage of credit limit I should work towards on 0% cards?

Thrugelmir

Underscore wrote: »

Thanks. If they looked at the whole picture and understood it (which from working on the inside of one of the top 10 UK lenders, they don't do either) I wouldn't have any problems.

I would suggest they do. Risk management have access to vast amount amount of statistical data. Which can be used within the lenders internal scoring algorithms when processing applications.

The fundamental difference is that lenders look top down. While borrowers look bottom up. Borrowers as is human nature, tend to be overly optimistic when it comes to finance.

Underscore

I wholeheartedly disagree. The truth of what goes on inside the organisation is that these fantastic algorithms to which you refer are outdated, not understood by more than 1-2 people, and not reviewed or challenged anywhere near often enough to reflect the change in the financial education of the public since sites like MSE have been online.

That is well exemplified in BTL - owning a number of properties or having a "magic number" such as 3, 10 etc. as many lenders do could not be more arbitrary. Debt outstanding (used on occasion) and true LTVs across portfolios should be the issues (alongside the more macro issues of lending in that postcode/area/block/town/village/city/county of course) - the lenders that actually even bother to enquire are only looking to see if you are on top of your portfolio, not doing anything remotely complicated. Diversification should be a strength not a weakness - that's nothing to do with top-down versus bottom-up viewpoints, it is a fundamental misunderstanding of the power and benefit of diversification and its risk mitigating qualities.

The reality is lenders get by under extreme pressure as market conditions and their product strategists dictate a very volatile pipeline of work, with creaking systems that have legacy software and hardware issues, and they do a hell of a lot of best-guessing.

If lenders were using the criteria remotely as intelligently as you suggest, MSE fora would be overrun with people getting turned down for credit cards as tarts would be incredibly simple to spot and some people have got serious form by now......

Lenders take years and years to even start performing new tasks and using data in anything like an optimal way - very few are anywhere near utilising their wealth of complaints data in a meaningful way, despite the one-stage process being nearly 2 years old, for example. No point in even getting started on big data.

Does anyone have an opinion/educated guess on the percentage of credit limit I should work towards on 0% cards?

cheops2006

30% would be my guess