Income declaration when applying for credit

AndyTh_2

I noticed this week's Question of the Week, and think there's an error in the answer:

Q: Should I include regular overtime in my income when I apply for credit? How do lenders verify my income? Andy, via Twitter.

MSE Helen's A: Application forms usually ask for your total annual income, so this would include regular overtime pay.

With loans and credit cards, what you've entered on the form is usually verified by comparing it with the cash going through your bank account (via credit reference agency checks) and also with what you've put on previous applications. Mortgages are much more stringent, and will ask you for payslips, and to break the overtime out. If it's not guaranteed overtime, a mortgage lender may only take 50% of the total into account when working out how much they'll lend you.

If a lender's unsure, or something looks odd with the income you've put, it may ask you for payslips to prove your income - so only put down a figure you can back up.

"what you've entered on the form is usually verified by comparing it with the cash going through your bank account (via credit reference agency checks)"

How do credit reference agencies supply this given they don't show positive balances even on credit reports let alone incoming/outgoing payments? I've a feeling it's a wrong answer.

YorkshireBoy

Google:

"Current Account Turnover data" and "CATO warning flag"

GingerBob_3

YorkshireBoy wrote: »

Google:

"Current Account Turnover data" and "CATO warning flag"

Yes, CRAs hold other data about you in addition to what appears on their credit reports, and you don't get to see it. Good eh!


They log so-called current account turnover for all your current accounts. This is a ridiculous form of analysis that can very easily give a misleading picture of your finances.


I don't ever recall seeing where you give permission to your bank for them to supply this information to the CRAs, but then again, they can do so without your consent anyway.


If you want to see what the CRAs really hold against you, hit them with a SAR. It does cost £10 but in theory they should provide you with ALL the data they hold about you, not just credit account data.

Doctor_Duke

GingerBob wrote: »

Yes, CRAs hold other data about you in addition to what appears on their credit reports, and you don't get to see it. Good eh!


They log so-called current account turnover for all your current accounts. This is a ridiculous form of analysis that can very easily give a misleading picture of your finances.


I don't ever recall seeing where you give permission to your bank for them to supply this information to the CRAs, but then again, they can do so without your consent anyway.


If you want to see what the CRAs really hold against you, hit them with a SAR. It does cost £10 but in theory they should provide you with ALL the data they hold about you, not just credit account data.

Blimey I never realised this. So all my current accounts (I have a few) and also my linked regular saviing accounts could be shared then?

[Deleted User]

So how would it work for people that are cycling money between Halifax Reward, Santander, TSB etc etc.

It could look like thousands of pounds have been credited per month to someone that is on a minimum wage job and (quite legally) playing the system

If they were to then state their income was 40k....???

Yes it's fraud, but this crazy 'check' seems like it wouldn't flag that situation (assuming you were consistent in the 40k story and job title!).

External transfers look, at first glance, just like a salary credit. It's only the banks themselves that would be able to work out you'd sent money between yourself/your wife etc.

GingerBob_3

Yes, it could be a problem. Maybe if you have multiple accounts the bean counters at Experian just take an average figure, who knows? In my case a significant part of my income goes nowhere near my current account. The whole idea of using current account turnover in an assessment of credit worthiness is quite preposterous.

solentsusie

One company I used to work for allowed you to have your salary split into more than one account. So you could pay most of your salary into a savings account if you chose to and it wouldn't hit your current account at all. It would have made it look like I was on a very low salary if this is the way it is worked out.