should my credit be so poor

pickedliver

Hi,

I signed up to MSE credit club yesterday and checked my report. I have quite a lot of debt, around 40K in my name spread across 6 credit cards and a loan.

I have no missed payments or CCJ's etc. My credit score if 674 which is poor. The only 'amber' factors are my debt level and credit utilization.

Should my credit score by this bad?

sambaird

Don’t pay any attention to the score. It’s meaningless. Read the sticky post at the top of the board for more information about this on the top of the board.

Lenders do not see your score when you apply for new credit, only your credit history and current levels of debt.

However, in terms of score, a high level of debt (In relation to your income) and utilisation could indicate that you are ‘poor bet’ for lenders and are therefore scored accordingly.

However... as I said - scores are about as much use as a chocolate fire guard.

DCFC79

pickedliver wrote: »

Hi,

I signed up to MSE credit club yesterday and checked my report. I have quite a lot of debt, around 40K in my name spread across 6 credit cards and a loan.

I have no missed payments or CCJ's etc. My credit score if 674 which is poor. The only 'amber' factors are my debt level and credit utilization.

Should my credit score by this bad?

But you do have £40k of debt.

Why should you not be in the poor category ?

It's just how the credit club see your history, another reference agency might rate you differently. It's up to the lenders how they see your level of debt eg is it bad or not, do we lend to the customer at what rate or don't we lend.

phillw

sambaird wrote: »

Don’t pay any attention to the score. It’s meaningless. Read the sticky post at the top of the board for more information about this on the top of the board.

Lenders do not see your score when you apply for new credit, only your credit history and current levels of debt.

However, in terms of score, a high level of debt (In relation to your income) and utilisation could indicate that you are ‘poor bet’ for lenders and are therefore scored accordingly.

However... as I said - scores are about as much use as a chocolate fire guard.

The score is useful, it gives you a rough idea about your attractiveness.

Generally speaking (although I'm sure someone will come along with some exception their mate heard about down the pub) if you have lots of bad things on your credit file then you'll have a poor credit score. This doesn't mean you won't be able to obtain credit, it might be you can't obtain credit at the markets lowest rates.

If you are looking for credit today, then knowing your score is pointless. It's mostly about trying to train you into financial behavior that isn't going to freak cautious lenders out in the future.

I would have thought £40k unsecured debt was pretty bad.

Ben8282

You have 6 credit cards and a loan so your ability to obtain credit can't be that bad!
The credit score is in itself meaningless. The only way to really judge if you will experience any difficulty in obtaining further credit is to apply and see what happens.
However with £40K unsecured credit card debt plus a loan, unless your income is exceptionally high I could well imagine lenders being concerned at your ability to repay further credit.

Nebulous2

What is your income?

Anything approaching your annual income in unsecured debt will be seen as a problem.

If you earn £40-50k then you are running in the red. If you earn £120k then £40k of debt might not be much of an issue.

eskbanker

Ben8282 wrote: »

However with £40K unsecured credit card debt plus a loan, unless your income is exceptionally high I could well imagine lenders being concerned at your ability to repay further credit.

Nebulous2 wrote: »

What is your income?

Anything approaching your annual income in unsecured debt will be seen as a problem.

If you earn £40-50k then you are running in the red. If you earn £120k then £40k of debt might not be much of an issue.

OP has posted a full SOA on the debt-free board, stating monthly net income of £3,689, suggesting annual gross in £60Kish territory, but also an eye-watering amount of total household debt that will inevitably be affecting overall affordability in the context of the contribution from a low-income wife:

https://forums.moneysavingexpert.com/discussion/comment/76653329#Comment_76653329

pickedliver

DCFC79 wrote: »

But you do have £40k of debt.

Why should you not be in the poor category ?

It's just how the credit club see your history, another reference agency might rate you differently. It's up to the lenders how they see your level of debt eg is it bad or not, do we lend to the customer at what rate or don't we lend.

Perhaps I should be in the poor category, I just wasn't really sure how it worked. I suppose I thought that as I pay on time etc that I might better than poor. As others have said, I am not too worried about the actual score, more the impact of it on getting 0% deals etc.

pickedliver

phillw wrote: »

The score is useful, it gives you a rough idea about your attractiveness.

Generally speaking (although I'm sure someone will come along with some exception their mate heard about down the pub) if you have lots of bad things on your credit file then you'll have a poor credit score. This doesn't mean you won't be able to obtain credit, it might be you can't obtain credit at the markets lowest rates.

If you are looking for credit today, then knowing your score is pointless. It's mostly about trying to train you into financial behavior that isn't going to freak cautious lenders out in the future.

I would have thought £40k unsecured debt was pretty bad.

Yes 40K isn't great, our total household debt is actually over 60K but 'only' 40K in my name. Despite it being very high, we do have a plan to pay it off and we are not in trouble, missing payments etc.

pickedliver

Ben8282 wrote: »

You have 6 credit cards and a loan so your ability to obtain credit can't be that bad!
The credit score is in itself meaningless. The only way to really judge if you will experience any difficulty in obtaining further credit is to apply and see what happens.
However with £40K unsecured credit card debt plus a loan, unless your income is exceptionally high I could well imagine lenders being concerned at your ability to repay further credit.

I have had most of the credit cards for many years. The loan was the most recent application about 3 years ago.

We earn ok money between us but there is no denying that our debt level is high and needs to be sorted.

pickedliver

Nebulous2 wrote: »

What is your income?

Anything approaching your annual income in unsecured debt will be seen as a problem.

If you earn £40-50k then you are running in the red. If you earn £120k then £40k of debt might not be much of an issue.

I earn around 65K and my wife 18.5K. Our total household debt is over 60K so we are definitely at an unhealthy ratio. Thankfully we have a smallish mortgage so we are in a position to fix it.