Loan application rejected - why?

redbobble

mcpitman said:

redbobble said:

Thanks for the swift response. 
I have 3 credit cards with nothing on. Also there are 2 dormant bank accounts I forgot about. Is it worth shutting some/all of these down this month to help with the application in June?
Depends on the limits and age of the accounts, I don't think 4 cards is excessive on your salaries. The more important point is what are the limits and are there any Money transfer offers on 0% available on them?
The 4 cards are just in my name. 2 are dormant (no idea of credit limit) 1 we use which is 0%. We have a balance of 4.5k limit 6k. 1 is associated with my bank and has a limit of £14,200. There is nothing on it, should I get them to lower it? I would never need to spend so much. Is it worth closing the other 2 dormant cards?
My partner, although on a lower income has no credit cards in her name and no car loans, would it be better she applied on her own, particularly as its a lower amount?
What does your partners credit file look like? Do you mean apply for a £20k loan on c£35k income? I wouldn't.
As we have the 10k, we would only look for another 10k. Trying to get everything as together as possible to increase the chances (electoral register, who should apply, closing cards/accounts we don't need). Her credit file is better than mine, 1 credit card, nothing on it, no other finance. Credit score said excellent, but she does earn less (hence why the credit is always in my name).
Or would it be better to do a joint application? It looks like there isn't many options with lenders out there at the minute!
I would go with a single application in my name if I were the higher earner. Honestly not sure how the whole "joint loan" application process works.
Makes sense. Guess I just want to know whether to shut any of the credit cards/bank accounts and/or lower the limit on the one card.
We have reviewed our incomings and outgoings, we are in pretty good order, particularly with the current climate we aren't spending much at all.
Great news, what are you left over with every month "spare" after any and all commitments?
We are left with approximately £2000 each month, that takes into account petrol to get to work etc, and a social "going out" budget. 
We had (wrongly it appears!) assumed the loan wouldn't be an issue, so put our savings towards deposit/solicitor etc so we could stretch to a bigger house. With our bigger salary we are comfortable we can repay the amount, it's just convincing the banks!
What period are you looking at borrowing the money over if you were to be successful and what would the estimated repayment be?
We have applied for the longest period possible (Natwest was 8 years). The logic behind it was that the monthly payments would be lower and when we remortgage (2023) we would take the equity out and repay the loan in full. Payment on £20k loan was about £240 a month, so would estimate a £10k loan to be £120 a month. More than manageable, but want to make my credit report as clean as possible!

I still think the main problem will be "credit exposure" (new borrowing in short amount of time, increasing outgoings) and possibly the Electoral roll issue.

There could be affordability issues too, for example of your "spare cash" is £1k per month, and you are still carrying balances on CC's and have car repayments, then in theory the £1k isn't enough to live on (as you are still borrowing, not saving). Therefore with an additional loan payment, this could make things harder or push you further into debt if any "money emergencies" cropped up.

Comments in bold above. Whatever tips I can have as what to do with the credit cards and bank accounts would be greatly appreciated. We hope the likelihood will increase with the loan at 10k and electoral role sorted. I imagine I have quite a large amount of access to credit (that I dont and won't want to use), so shutting that seems logical?

Thrugelmir

redbobble said:

 It is currently a building site and non-habitable.

There's your issue. Address that and you may be able to obtain a mortgage. 

Otherwise you'll need to approach a bank for a development loan or something similar. Alternatively a lending specialist. 

Residential mortgage lending has the property being habitable as a primary criteria. 

alittlelife

redbobble said:

mcpitman said:

redbobble said:

Thanks for the swift response. 
I have 3 credit cards with nothing on. Also there are 2 dormant bank accounts I forgot about. Is it worth shutting some/all of these down this month to help with the application in June?
Depends on the limits and age of the accounts, I don't think 4 cards is excessive on your salaries. The more important point is what are the limits and are there any Money transfer offers on 0% available on them?
The 4 cards are just in my name. 2 are dormant (no idea of credit limit) 1 we use which is 0%. We have a balance of 4.5k limit 6k. 1 is associated with my bank and has a limit of £14,200. There is nothing on it, should I get them to lower it? I would never need to spend so much. Is it worth closing the other 2 dormant cards?
My partner, although on a lower income has no credit cards in her name and no car loans, would it be better she applied on her own, particularly as its a lower amount?
What does your partners credit file look like? Do you mean apply for a £20k loan on c£35k income? I wouldn't.
As we have the 10k, we would only look for another 10k. Trying to get everything as together as possible to increase the chances (electoral register, who should apply, closing cards/accounts we don't need). Her credit file is better than mine, 1 credit card, nothing on it, no other finance. Credit score said excellent, but she does earn less (hence why the credit is always in my name).
Or would it be better to do a joint application? It looks like there isn't many options with lenders out there at the minute!
I would go with a single application in my name if I were the higher earner. Honestly not sure how the whole "joint loan" application process works.
Makes sense. Guess I just want to know whether to shut any of the credit cards/bank accounts and/or lower the limit on the one card.
We have reviewed our incomings and outgoings, we are in pretty good order, particularly with the current climate we aren't spending much at all.
Great news, what are you left over with every month "spare" after any and all commitments?
We are left with approximately £2000 each month, that takes into account petrol to get to work etc, and a social "going out" budget. 
We had (wrongly it appears!) assumed the loan wouldn't be an issue, so put our savings towards deposit/solicitor etc so we could stretch to a bigger house. With our bigger salary we are comfortable we can repay the amount, it's just convincing the banks!
What period are you looking at borrowing the money over if you were to be successful and what would the estimated repayment be?
We have applied for the longest period possible (Natwest was 8 years). The logic behind it was that the monthly payments would be lower and when we remortgage (2023) we would take the equity out and repay the loan in full. Payment on £20k loan was about £240 a month, so would estimate a £10k loan to be £120 a month. More than manageable, but want to make my credit report as clean as possible!

I still think the main problem will be "credit exposure" (new borrowing in short amount of time, increasing outgoings) and possibly the Electoral roll issue.

There could be affordability issues too, for example of your "spare cash" is £1k per month, and you are still carrying balances on CC's and have car repayments, then in theory the £1k isn't enough to live on (as you are still borrowing, not saving). Therefore with an additional loan payment, this could make things harder or push you further into debt if any "money emergencies" cropped up.

Comments in bold above. Whatever tips I can have as what to do with the credit cards and bank accounts would be greatly appreciated. We hope the likelihood will increase with the loan at 10k and electoral role sorted. I imagine I have quite a large amount of access to credit (that I dont and won't want to use), so shutting that seems logical?

Re the dormant accounts - things relevant to these that a lender *may* take into account when considering your loan application include 

- how much credit do you have available vs how much you are using
- the maturity of your accounts and credit agreements - ie how long have you held these financial relationships 

so these would indicate it may be better to keep them open. But every lender has its own scorecard, and it’s impossible to tell whether these would impact positively, which is possibly why no one is committing to an answer on it so far in this thread!

redbobble

Thrugelmir said:

redbobble said:

 It is currently a building site and non-habitable.

There's your issue. Address that and you may be able to obtain a mortgage. 

Otherwise you'll need to approach a bank for a development loan or something similar. Alternatively a lending specialist. 

Residential mortgage lending has the property being habitable as a primary criteria. 

Not after a mortgage?

redbobble

Re the dormant accounts - things relevant to these that a lender *may* take into account when considering your loan application include 

- how much credit do you have available vs how much you are using
- the maturity of your accounts and credit agreements - ie how long have you held these financial relationships 

so these would indicate it may be better to keep them open. But every lender has its own scorecard, and it’s impossible to tell whether these would impact positively, which is possibly why no one is committing to an answer on it so far in this thread!

That explains it. My initial thoughts are leave it as it is, but lower my credit limit on the credit card that has a £14.5k limit. I will never use it but have had the bank and card over 10 years so don't want to close that one. Does lowering your credit limit have an impact on your credit score? Or are you saying that if I get rid of it, the amount of credit i have available vs how much I'm using as a percentage will increase? 

[Deleted User]

I wouldn't lower your limit.  It might increase your credit score but Experian won't lend you any money and it'll increase your perceived risk amongst lenders.

Better to close entirely than have lenders think you're being managed out, but I would leave it.  Available credit is generally not the major factor.

redbobble

Thanks for all the superb advise. Much appreciated.
I will be reapplying for £10k 28 days after I applied previously. I will pull my credit score again to make sure the electoral roll has been corrected and fingers crossed it will go through.
Any final tips appreciated.