Loan application refused wheres best to apply and why was it refused

Mitchel.

Hello everyone

Would like some advice please my fiancé tried to apply for a loan she has a credit score of 580 out of 700 on one credit checking site, no defaults and a full time job working for nhs on £25k.she pays all her payments on time to.

She currently hae a consolidation loan which has 7k left which she got through work so they deduct the payment for it before tax and the interest rate is low to. Other than that a small 2k credit card and few bits of finance for like a phone tv and kitchen appliances. It says on here credit account on the credit agency shes using 8k of the 20k credit avaliable to her.

She can't understand why she was refused a loan with tesco bank. Is it because she has an £8k credit card with nothing on it sat there?. Should she of applied for the loan through her bank barclays? Or through one of the creditors she uses for store purchases like creation finance?.

Any help would be great appreciated 

MattMattMattUK

Mitchel. said:

Hello everyone

Would like some advice please my fiancé tried to apply for a loan she has a credit score of 580 out of 700 on one credit checking site,

Credit scores are meaningless, made up numbers, no lender ever sees them, ignore them.

Mitchel. said:

no defaults and a full time job working for nhs on £25k.she pays all her payments on time to.

She currently hae a consolidation loan which has 7k left which she got through work so they deduct the payment for it before tax and the interest rate is low to. Other than that a small 2k credit card and few bits of finance for like a phone tv and kitchen appliances. It says on here credit account on the credit agency shes using 8k of the 20k credit avaliable to her.

If we add all that together she has around £10k, or a bit more of unsecured debt. She also has another £10-12k of available credit, that means that if you add the borrowing she already has, and the potential to max out credit cards, then she is already close to her entire gross salary, that is a risk factor to lenders. 

Mitchel. said:

She can't understand why she was refused a loan with tesco bank. Is it because she has an £8k credit card with nothing on it sat there?. Should she of applied for the loan through her bank barclays? Or through one of the creditors she uses for store purchases like creation finance?.

Any help would be great appreciated 

It is a combination of factors, she has debt, some of it might be longstanding as she has a consolidation loan, she has credit available and is now looking to take out additional loans. To any potential lender that looks like someone who is not managing their finances well, is potentially in persistent debt, has the ability to make that worse (maxing out the credit card), buys items on finance and now wants to borrow more money. For many lenders, who now have a reduced appetite for risk that is not a customer they wish to take on. 

My advice would be that more debt probably is not the solution. Heading over to the debt-free wannabee board on this forum might be a good idea. People on there will help her work through finances, how to get costs down, clear debt and get her finances back on track. Remember that apart from an occasional 0% interest finance deal on an item, the only debt that makes any real sense is a mortgage.

Ebe_Scrooge

The credit score is irrelevant - it's neither used nor even seen by any lender.  The short answer is that she doesn't meet the lending criteria set by Tesco Bank.  Each lender has it's own criteria which are confidential and commercially sensitive, so you'll never be able to know what constitutes an "ideal customer" for a particular lender.

It's quite likely that it comes down simply to affordability.  If she's already got a loan, credit card debt and other finance, the lender probably took the approach than additional borrowing would overstretch her.

She could try making one more application with a different lender, but I'd advise against making more than one more.  Lots of applications in a short space of time can give the impression that you're struggling and desperate for credit, which reflects badly on your credit history.

What is the purpose of the loan?  She needs to question whether she really needs it, or is it for something she wants rather than needs?

Mitchel.

MattMattMattUK said:

Mitchel. said:

Hello everyone

Would like some advice please my fiancé tried to apply for a loan she has a credit score of 580 out of 700 on one credit checking site,

Credit scores are meaningless, made up numbers, no lender ever sees them, ignore them.

Mitchel. said:

no defaults and a full time job working for nhs on £25k.she pays all her payments on time to.

She currently hae a consolidation loan which has 7k left which she got through work so they deduct the payment for it before tax and the interest rate is low to. Other than that a small 2k credit card and few bits of finance for like a phone tv and kitchen appliances. It says on here credit account on the credit agency shes using 8k of the 20k credit avaliable to her.

If we add all that together she has around £10k, or a bit more of unsecured debt. She also has another £10-12k of available credit, that means that if you add the borrowing she already has, and the potential to max out credit cards, then she is already close to her entire gross salary, that is a risk factor to lenders. 

Mitchel. said:

She can't understand why she was refused a loan with tesco bank. Is it because she has an £8k credit card with nothing on it sat there?. Should she of applied for the loan through her bank barclays? Or through one of the creditors she uses for store purchases like creation finance?.

Any help would be great appreciated 

It is a combination of factors, she has debt, some of it might be longstanding as she has a consolidation loan, she has credit available and is now looking to take out additional loans. To any potential lender that looks like someone who is not managing their finances well, is potentially in persistent debt, has the ability to make that worse (maxing out the credit card), buys items on finance and now wants to borrow more money. For many lenders, who now have a reduced appetite for risk that is not a customer they wish to take on. 

My advice would be that more debt probably is not the solution. Heading over to the debt-free wannabee board on this forum might be a good idea. People on there will help her work through finances, how to get costs down, clear debt and get her finances back on track. Remember that apart from an occasional 0% interest finance deal on an item, the only debt that makes any real sense is a mortgage.

Hi apologies maybe forgot to mention what the loan is for a camper van not consolidate her debt as the debt she does have is either  0 percent or 2% apr which is all being paid off not minium payments.


So would she be better closing the 8k credit card as she never uses it.

Mitchel.

Ebe_Scrooge said:

The credit score is irrelevant - it's neither used nor even seen by any lender.  The short answer is that she doesn't meet the lending criteria set by Tesco Bank.  Each lender has it's own criteria which are confidential and commercially sensitive, so you'll never be able to know what constitutes an "ideal customer" for a particular lender.

It's quite likely that it comes down simply to affordability.  If she's already got a loan, credit card debt and other finance, the lender probably took the approach than additional borrowing would overstretch her.

She could try making one more application with a different lender, but I'd advise against making more than one more.  Lots of applications in a short space of time can give the impression that you're struggling and desperate for credit, which reflects badly on your credit history.

What is the purpose of the loan?  She needs to question whether she really needs it, or is it for something she wants rather than needs?

The loan is for a camper van so we were gonna take 9k over 5 years so wouldnt be alot a month.

MattMattMattUK

Mitchel. said:

MattMattMattUK said:

Mitchel. said:

Hello everyone

Would like some advice please my fiancé tried to apply for a loan she has a credit score of 580 out of 700 on one credit checking site,

Credit scores are meaningless, made up numbers, no lender ever sees them, ignore them.

Mitchel. said:

no defaults and a full time job working for nhs on £25k.she pays all her payments on time to.

She currently hae a consolidation loan which has 7k left which she got through work so they deduct the payment for it before tax and the interest rate is low to. Other than that a small 2k credit card and few bits of finance for like a phone tv and kitchen appliances. It says on here credit account on the credit agency shes using 8k of the 20k credit avaliable to her.

If we add all that together she has around £10k, or a bit more of unsecured debt. She also has another £10-12k of available credit, that means that if you add the borrowing she already has, and the potential to max out credit cards, then she is already close to her entire gross salary, that is a risk factor to lenders. 

Mitchel. said:

She can't understand why she was refused a loan with tesco bank. Is it because she has an £8k credit card with nothing on it sat there?. Should she of applied for the loan through her bank barclays? Or through one of the creditors she uses for store purchases like creation finance?.

Any help would be great appreciated 

It is a combination of factors, she has debt, some of it might be longstanding as she has a consolidation loan, she has credit available and is now looking to take out additional loans. To any potential lender that looks like someone who is not managing their finances well, is potentially in persistent debt, has the ability to make that worse (maxing out the credit card), buys items on finance and now wants to borrow more money. For many lenders, who now have a reduced appetite for risk that is not a customer they wish to take on. 

My advice would be that more debt probably is not the solution. Heading over to the debt-free wannabee board on this forum might be a good idea. People on there will help her work through finances, how to get costs down, clear debt and get her finances back on track. Remember that apart from an occasional 0% interest finance deal on an item, the only debt that makes any real sense is a mortgage.

Hi apologies maybe forgot to mention what the loan is for a camper van not consolidate her debt as the debt she does have is either  0 percent or 2% apr which is all being paid off not minium payments.


So would she be better closing the 8k credit card as she never uses it.

It does not matter what it is for, it is additional debt and what the lender is trying to evaluate is do they think they will get their money back with no hassle and no risk. Someone with debts of around 50% of their gross income, credit card facilities that would take them up to nearly 100% of their gross income.

Whilst closing the card might have a positive impact in the longer term, in the short term it will definitely not and individual lenders will still assess based on their own criteria.

Being realistic, with the levels of debt she has already, more borrowing is not the answer. Postpone the camper van purchase, clear down debts and save up the money instead of borrowing it. 

[Deleted User]

She doesn't need (and cannot afford) a camper van, she needs to clear her debt first

Ebe_Scrooge

I have to agree with Matt - lenders don't look at the purpose of the loan, just cold hard figures relating to total indebtedness.  A camper van falls firmly into the category of "want" rather than "need" - save up for a few years and buy for cash.

lordmountararat

For £9K the camper van is not going to be in the first flush of youth, and she may well have to be prepared for expensive repairs and maintenance. My elderly camper van cost me the best part of two grand to keep on the road this year, not including VED (£285) or insurance (£350). Elderly camper vans are not for the faint hearted and corrosion can be a killer.

Sncjw

I would save for a campervan. If its the style I am thinking of they can be way more than 9k. She should focus on paying her debt rather than adding more to it.

Also why can't you get the finance if you are that desperate for a want.

Giving the kitchen applience on finance it screams that you can't afford  to get the basic things you need never mind wants.

What happens if she loses her job and what will happen to the finance through her job? Would it be better to just pay down the current debt. 

Thrugelmir

Mitchel. said:

Ebe_Scrooge said:

The credit score is irrelevant - it's neither used nor even seen by any lender.  The short answer is that she doesn't meet the lending criteria set by Tesco Bank.  Each lender has it's own criteria which are confidential and commercially sensitive, so you'll never be able to know what constitutes an "ideal customer" for a particular lender.

It's quite likely that it comes down simply to affordability.  If she's already got a loan, credit card debt and other finance, the lender probably took the approach than additional borrowing would overstretch her.

She could try making one more application with a different lender, but I'd advise against making more than one more.  Lots of applications in a short space of time can give the impression that you're struggling and desperate for credit, which reflects badly on your credit history.

What is the purpose of the loan?  She needs to question whether she really needs it, or is it for something she wants rather than needs?

The loan is for a camper van so we were gonna take 9k over 5 years so wouldnt be alot a month.

Defeats the object of a consolidation loan. Lenders have statistical data that the majority of people who use this route to resolve their financial habits unfortunately fail. Simply advancing further credit irrespective of purpose doesn't nothing to help the potential borrower. Totally the reverse in fact.