Credit card affordability

rjf13

I recently joined MSE credit club and have a credit score of 999, but my affordability is very weak for both credit cards and loans. The only 'credit' I have is the overdraft on my current account and a mobile phone contract which I think is one of the main reasons I don't have good affordability. To complicate things further, I started working last year but had a prolonged period of sickness so my income was SSP for a good few months but I am back at work now. I recently tried to get a loan with the bank account my current account is with and was declined.

I'm looking at how to build my credit and was hoping to apply for the santander all in one credit card but I am cautious to have another rejection on my credit report.

I was wondering if anyone would be able to advise me on the best course of action? I don't whether I am better to wait a few months (whereby I will have a regular income) or whether I should try now?

mwarby

I think the affordability is a function of
-wage
-rent/mortgage
-outstanding debt amounts

Given you say you have very little credit, its probably the other 2, when combined with an assumed value for other costs of living, suggests you'd have little left over to pay off any loan or card

I would hold fire until you have a steady income (steady or increasing for about a year)

[Deleted User]

Ignore the made up scores and ratings.

The affordability scales is just a guess at how lenders would view you based on the info you entered when you signed up - salary, rent/mortgage, outgoings etc.

Try some eligibility checkers to see what credit cards you qualify for then go from there.

Or just apply for the Santander one - one hard search in your files is nothing

PixelPound

The score is probably high due to lack of credit, as per !!!'s advice just ignore it. You don't say how long ago the rejection was (note your credit file only shows the hard search for the application not whether it was accepted/rejected or not continued with by you), they have less impact after 6 months and fall off after a year. If its just one hard search too that isn't so much the problem, its your lack of credit history that is the problem.

Feel free to apply for the Santander account, assuming they don't have a minimum income threshold then you low income will most likely effect what initial credit limit you are given, rather than acceptance. Is there a particular reason you want the Santander card - just there are eligibility checkers out there that will do a soft search and you could then go for a card most likely to be accepted for.

DCFC79

Rejections aren't recorded on your files, just that a search was carried out.

rjf13

Thank you all for the advice.

The rejection was only about a month ago.

The reason I was looking at the Santander card was because I hold other accounts with Santander and the benefits seem reasonable (30 months of 0% interest on purchases and 0.5% cash back).

Will it make any difference that I’m currently in my overdraft? It would it be better to wait until pay day which will bring me out of it!

Craig1981

there are reasonable builder card available - Vanquis, Aqua etc. should be accepted for one of these with no probs. small limit - spend regularly and pay off in full to avoid the high interest

best way for building a better history

T-G-C

rjf13 wrote: »

Thank you all for the advice.

The rejection was only about a month ago.

The reason I was looking at the Santander card was because I hold other accounts with Santander and the benefits seem reasonable (30 months of 0% interest on purchases and 0.5% cash back).

Will it make any difference that I’m currently in my overdraft? It would it be better to wait until pay day which will bring me out of it!

In response to the part in bold: the search should have little or no impact at this point. The older a search is, the less lenders tend to use it in their decision making processes.

I am confused how one overdraft and a mobile contract could make obtaining credit so difficult. Is there past demons on there like defaults, missed or late payments etc. from less than 6 years ago that is making your file less appealing? Is your overdraft a considerable amount?

On a side note, being absent from work and receiving SSP would not appear on your credit file and lenders would not know this. The bank may know this, because they have access to your everyday finances from your current account data, but other than that, there is no real link to it.

Assuming the main problem here is having an under-established credit file and not anything else, as someone above has suggested, consider a less mainstream card, as prime lenders are conservative in their decisions and mainly approve people with an established & credible financial record. The lender I recommend for the most simplicity is Capital One - be allocated a small limit of £200 - £1000 and use it for your monthly expenses like petrol, shopping or casual purchases. When the statement is generated and not before then (because it defeats the purpose) clear the balance in full using the money normally used for those expenses - rinse and repeat this each month. This will demonstrate sensible use of credit, financial stability and will begin to notice an improvement in being approved for more appealing credit products.

Tips when using a sub-prime credit card:

1. Do not max out the credit limit. If your credit limit is £200, use no more than £150 and then clear it in full upon statement creation.

2. Do not carry a balance. This will attract interest, demonstrate credit dependency on such a small limit and overall make you a less attracting customer for a prime lender.

3. Do not miss a payment, make a payment late or go over your credit limit. Keeping under £150 on a £200 limit will prevent this. If you do find yourself edging your credit limit for whatever reason, make a payment ASAP to bring it back down until the statement date and then clear the rest in full. Having a statement for a balance of £199.99 on a credit limit of £200 will look terrible in the eyes of a prime lender, so ensure it is a sensible balance on your statement.

Follow these tips and you should notice improvement. It takes time and could take quite a while, but it will be worth it in the end.