MSE Credit Club affordability

londonlydia

Question on MSE's Credit Club...how does it calculate Affordability? I've come out with a score of 'very weak' for it - despite not being asked for any outgoings other than 'rent/ mortgage', which for me is nothing (I put in 0 ). I get a decent wage, and with income from savings/ shares and partners income included as well it can't be an income issue. The only debt I have is my monthly credit card balance, which is below my monthly wage and a small fraction compared to my savings too.

Is it a divide-by-zero error perhaps? I've changed it to a £1 rent in the box to check, but it wont rerun until left overnight so dont know yet...

Candyapple

MSE's unique new Affordability Score:

This new measure is something lenders do, but isn't part of any public credit score.

For the first time anywhere (that we know of) we mimic the way lenders check if you can afford a product, by looking at factors such as your income, exposure to debt and estimated expenditure. And we've also specific affordability scores for loans, credit cards and (coming soon) mortgages.


3. Credit Hit Rate in the real world:

Your credit report combined with your affordability dictates likely acceptance. And ultimately that's what really counts.

So after mulling this, we came up with the Credit Hit Rate to show the percentage of a basket of top deals you're likely to get in the real world.

http://www.moneysavingexpert.com/news/loans/2016/09/the-totally-free-unique-mse-credit-club-is-launched

londonlydia

Candyapple wrote: »

http://www.moneysavingexpert.com/news/loans/2016/09/the-totally-free-unique-mse-credit-club-is-launched

Thanks -

But this is why I'm confused - I read that statement and it seems odd as the form doesnt ask for any expenditure other than rent, which for me is zero. So as far as the Affodability check goes, I have no outgoings, and a reasonable monthly income. On all the other ratings I'm green. I think that maybe there is a fault with the form?

Superscrooge

There is information on the below link explaining how affordability is calculated which might help?

https://clubs.moneysavingexpert.com/creditclub/affordability

londonlydia

Thanks,

I'm still convinced it's an issue with the form - i'm intrigued to see if making my outgping a £1 will make a difference when it re-runs overnight.

I should have said, the specific issue is 'disposable income'...'debt ratio' and 'credit utilisation' is V.good (top marks), but disposable income is v.low and I cannot fathom why it has been calculated as such. In fact, I cannot see anywhere which asks abouts disposable income unless I've missed a page on the form somewhere?

MSE_Chris

londonlydia wrote: »

Thanks,

I'm still convinced it's an issue with the form - i'm intrigued to see if making my outgping a £1 will make a difference when it re-runs overnight.

I should have said, the specific issue is 'disposable income'...'debt ratio' and 'credit utilisation' is V.good (top marks), but disposable income is v.low and I cannot fathom why it has been calculated as such. In fact, I cannot see anywhere which asks abouts disposable income unless I've missed a page on the form somewhere?

Hi londonlydia,

The disposable income figure takes into account data you've provided to us (e.g. salary, dependents, mortgage), plus items from your credit file. This’ll include your loan and credit card balances (even if you pay off in full each month), plus any other debts showing. To check these details, just go to the Credit Report tab within your account.

The aim here is to mimic the decisions which lenders will take. Lenders don't usually take a full income and expenditure report when you make a credit card or personal loan application so to speed up the process for both you and the lender, it looks at expenditure data from the Office of National Statistics, calculating how someone of your demographic might spend. So although your own spending is low, this won't necessarily be reflected in the calculations.

It is possible to have low affordability scores, even if your Experian Credit Score is high and you’re showing as a good chance of being accepted for products. Remember, your Experian Credit Score, just looks at your Credit History, it doesn’t take into account your earnings or expenditure, so is only part of the story.

This is why we created the Credit Hit Rate, so you get to see the full picture. If you’re seeing high scores, but yet your affordability is low, it indicates that lenders would still likely offer your products, but you may get a worse rate or lower credit limit.

I hope you find this explanation helpful.

Dribiddi

I also scratch my head at this affordability score
My debt ratio and credit utilisation are graded as good yet I am being accessed as having a low disposable income...?? I earn 25k per year as does my partner, between us we have over £1k of disposable income each month after essential costs. I have approx £8k of debt owed across x3 credit cards

PixelPound

Take it with a large pinch of salt IMO. I had some fun playing with the figures adding £1K to my salary each time to see what it would take to get out of v.weak and then weak. Doesn't affect me getting accepted for a CC, though maybe because they give me a limit under £10K it does lol (I currently have under £3K of debt on other CC at 0% so they give me far more than I would use anyway)

londonlydia

Thought I would rekindle this as I've just had another look at the credit club after I got an email alert that my credit score has changed. I stopped bothering with the credit club because of the affordability/ disposable income section not working... And checking today it still isn't! I can only think that the code doesn't cope when you don't have to pay rent or a mortgage.

RG2015

londonlydia wrote: »

Thought I would rekindle this as I've just had another look at the credit club after I got an email alert that my credit score has changed. I stopped bothering with the credit club because of the affordability/ disposable income section not working... And checking today it still isn't! I can only think that the code doesn't cope when you don't have to pay rent or a mortgage.

I have just checked mine as I have a zero on rent/mortgage and it shows affordability as good.

MSE_Chris

londonlydia wrote: »

Thought I would rekindle this as I've just had another look at the credit club after I got an email alert that my credit score has changed. I stopped bothering with the credit club because of the affordability/ disposable income section not working... And checking today it still isn't! I can only think that the code doesn't cope when you don't have to pay rent or a mortgage.

Hi londonlydia,

Hopefully I can provide some more insight into how the disposable income indicator works in Credit Club.

The disposable income figure takes into account data you've provided to us (e.g. salary, dependents, mortgage), plus items from your credit file. This’ll include your loan and credit card balances (even if you pay off in full each month), plus any other debts showing. To check these details, just go to the Credit Report tab within your account.

Also be sure to include your partner's income in the "Additional household income, before tax" section in your settings.

With most credit you apply for, lenders estimate/make assumptions about your expenditure and how much you can repay each month after housing and other outgoings. To do this they use data from the likes of the Office for National Statistics. This looks at what someone like you typically spends. As we try to copy lenders’ assessments, this is how we calculate this score too. So this is why your disposable income may not reflect your exact circumstances and frustratingly, cutting your spending won’t help – but paying off existing debts might.

Whenever you make changes to your Credit Club settings, the affordability scores aren't updated straight away but will update to reflect any changes when your Credit Score next updates in the club.

It’s possible to have low affordability scores, even if your Experian Credit Score is high and you’re showing as a good chance of being accepted for products. Remember, your Experian Credit Score, just looks at your Credit History, it doesn’t take into account your earnings or expenditure, so is only part of the story. This is why we created the Credit Hit Rate, so you get to see the full picture. If you’re seeing high scores, but yet your affordability is low, it indicates that lenders would still likely offer your products, but you may get a worse rate or lower credit limit.

I hope this helps explain how this works but let me know if you have any questions.

Thanks,

MSE Chris