Beware having a good credit history.

RBear

Hi all.
Although the heading is slightly tongue in cheek there is an element of truth in it.
To set the scene I have a good credit history, i have never missed a payment, and have an experian score of 984/1000 and an equifax score of 457. I had a loan (£13,500) which I have now finished paying (3 years early) and a c/c balance of app £1,300 limit is £5.5k (this is all my debt - no mortgage).

I applied for a 0% c/c to transfer my balance over and after the application process the decision came back: Thankyou for applying etc etc.... you have been accepted etc etc.... our credit scoring system gives you a limit of £1,000

I phoned them to ask if they could up it by £500, but it was like getting blood out of a stone. "Sorry, your credit history and our scoring system only allows us to give you this limit, we will review your limit in 6 months"

"So what is wrong with my history that only allows this limit????"

No answer.

The only reason I can come up with for not getting a higher limit is that they wont make much money off me. In fact they wont make any off me as i'm not using them.
So beware having a good credit history:p

CLAPTON

I dont think your credit score comes into it.. its increasingly common for credit limits on 0% cards to be set quite low for obvious commercial reasons.
If your credit score was poor you wouldn't have been offered the card at all.

Milarky

Is it worth applying now for another card with a different issuer to test this theory? If you get more credit so much the better. If you get rejected that is worrying, but you'd still have this card. If you get a lot more credit it may suggest that some banks are just stingier than others. (Can't see this being an adverse thing for you one way or another - I usually apply for two cards at the same time myself)

codger

RBear wrote: »

The only reason I can come up with for not getting a higher limit is that they wont make much money off me. In fact they wont make any off me as i'm not using them.
So beware having a good credit history:p

You're correct.

Lenders operate in two distinctly different sectors: a) loans where they must calculate the risk of borrower default; b) loans where they must calculate the risk of borrower fulfilment.

Where (a) is concerned, a good credit history is essential. It reassures the lender that the loan is safe. And because it's safe, it is profitable.

Where (b) is concerned, a good credit history is unhelpful. This is because it reassures the lender that the loan is safe. But because it's safe, it's unprofitable.

(b) applies where a lender is (for example) providing finance for retailer promotions that allow a purchaser to acquire goods, the cost of which does not have to be met until six months' / 12 months' / two years' hence.

A purchaser who settles within the relevant time-scale pays no interest.

A purchaser who doesn't settle becomes liable for scheduled repayments at an absurdly high APR.

It is therefore the lender's objective to deal only with purchasers unlikely to settle within the agreed time-scale, because these are the people who will fall victim to the high APR.

I have been turned down twice by two separate retailer schemes offering a Buy Now, Pay In 12 Months scheme.

My credit history is flawless.

As such, I represent as big a risk to the profitability of the provider of deferred-interest financing as the risk represented by someone with a poor credit history does to the lender of immediate-interest financing.

RBear

I think Clapton is right when he says it's a commercial decision. There isn't much profit for them in this.

My issue is mainly that they specifically said that the decision was based on credit history. I'd respect them more if they said it was commercial.

I also think that a lot of companies will start reducing initial credit limits as the financial crunch continues.

YorkshireBoy

Loans are usually reported to the CRA's as n x £/m, where

n = number of months in term, and
£/m = monthly payment.

Bearing in mind your Equifax 'score' is much lower than Experian's, it is possible that because you've paid the loan off early it has yet to be reported to Equifax as 'settled'.

The above, coupled with the available credit on your current card, may have swayed the decision for a lender who searches only Equifax...as Barclaycard do. Is it the Barclaycard you have applied for?

RBear

YorkshireBoy wrote: »

Bearing in mind your Equifax 'score' is much lower than Experian's, it is possible that because you've paid the loan off early it has yet to be reported to Equifax as 'settled'.

Both fail to show settled as yet, though the credit card company know it has been settled.

YorkshireBoy wrote: »

The above, coupled with the available credit on your current card, may have swayed the decision for a lender who searches only Equifax...as Barclaycard do. Is it the Barclaycard you have applied for?

It was Barclaycard, who, BTW, also said that if I moved my current account to them I would be able to get a much better limit.

YorkshireBoy

RBear wrote: »

Both fail to show settled as yet, though the credit card company know it has been settled.

How, if they have been unable to confirm from their credit search?

It was Barclaycard, who, BTW, also said that if I moved my current account to them I would be able to get a much better limit.

Barclaycard have become very strict of late. They're currently declining 50% of credit card applicants. Of the 50% accepted, 33% of these do not get the product/rate they applied for. Of the 66% (of the 50%) that do get accepted, Barclaycard then give generally lower limits anyway...if all that makes sense?

At the end of the day, you'd have been better to wait until your files were updated with the settled status of your loan...and especially before applying to a lender such as Barclaycard.

I agree though, that credit cards bundled with current accounts do tend to give better limits, especially if you commit to switching and paying your salary in.

RBear

YorkshireBoy wrote: »

How, if they have been unable to confirm from their credit search?

Sorry, I failed to be clear there. They know about it, but haven't confirmed it.

YorkshireBoy wrote: »

At the end of the day, you'd have been better to wait until your files were updated with the settled status of your loan...and especially before applying to a lender such as Barclaycard..

Probably so. Though it's not a huge issue either way for me.
Having spoken to them on numerous occasions, we're working towards an increase in the limit.

lisyloo

The only reason I can come up with for not getting a higher limit is that they wont make much money off me.

You might be thinking along the right lines but............
There is a banking crisis or credit crunch going on at the moment so I don't think everyone should expect loads of free credit and free banking to continue.
The banks are having to review how they make money.

It's pure speculation, but my opinion is that it's a lot more to do with a global banking crisis than your personal credit rating.

wookiemaster

Credit Crunch.....this week I forgot to pay a £16 payment to MINT.
Its the first time I have missed a payment. My credit limit beofre
the late payment was £10000. I have just received a letter to say
my credit limit has been reduced to £500....I am not joking....
Well, fortunately this is not my sole card and it will not effect me.
The £500 limit is what I had on the card as debt, so basically after
missing one payment, for which I will be charged, MINT are saying
we no longer want your business. The feeling is mutal.