Credit affordability change

stuwho04

Could anyone shed some light on this for me please? 

So last year I asked my bank to reduce the amount of credit available on my credit card, as it seemed excessively high for what I was using it for (think it was over £20k). They said they normally don't get request to lower the credit limit but agreed to lower it to my requested £5k.

But since then my credit card and loan affordability has dropped from very good to very weak. 

The only other financial change is that I spent a large chunk of my savings, but my income and outgoings haven't changed at all.

So my question is, due to the bank reducing the credit limit on my card would this have a direct effect on my credit card and loan affordability scoring? 

Thanks 

Stu

MorningcoffeeIV

Do you mean the affordability scoring as shown on one of the CRAs, such as the Credit Club?

If so, don't worry about it. It's not a real indicator and not used in lending decisions.

stuwho04

MorningcoffeeIV said:

Do you mean the affordability scoring as shown on one of the CRAs, such as the Credit Club?

If so, don't worry about it. It's not a real indicator and not used in lending decisions.

Hi,

Yes, both on Experian and the MSE credit club show a very weak affordability score for some reason and has done for many months now.
I just can't understand why and was worried as it indicates that I may find it difficult to get a loan or credit card.

Thanks

Stu

MrSilk

Do you have a balance on this credit card? if so, it's possible your debt to limit ratio has thrown things out of whack. 

stuwho04

That is a possibility actually. I was using the card for every day shopping and fuelling the car etc. and paying it off in full each month. But presumably if I was above my debt to limit ratio this could have a negative effect. This could be more likely as I have had the credit limit reduced considerably 

penners324

Not something to worry about. It's a gimmick by the CRAs. 

MrSilk

penners324 said:

Not something to worry about. It's a gimmick by the CRAs. 

Yes while the score is irrelevant it could have an impact on future applications when they check affordability. 

stuwho04

That's what I was afraid of. The card has no debt on it anymore, do you know how long it would take for the score to start increasing?

CliveOfIndia

stuwho04 said:

I was using the card for every day shopping and fuelling the car etc. and paying it off in full each month. But presumably if I was above my debt to limit ratio this could have a negative effect. This could be more likely as I have had the credit limit reduced considerably 

If you're using the card regularly and always paying it off in full (which is absolutely the right thing to do) then the debt to limit ratio is irrelevant.

stuwho04 said:

That's what I was afraid of. The card has no debt on it anymore, do you know how long it would take for the score to start increasing?

Your score is completely meaningless, as is the CRAs assessment of your affordability.

stuwho04 said:

The only other financial change is that I spent a large chunk of my savings, but my income and outgoings haven't changed at all.

Savings do not appear on your credit file, and are not taken into account by any lender either.

Honestly, you can safely ignore 90% of what you see on your credit report.  When you come to apply for credit, a lender will assess you based upon your personal circumstances and credit history.  Regular use and full repayment of a credit card is a positive thing - it shows that you are borrowing within your means, and always repaying what you owe.

Things like late payments, defaults, CCJs are obviously negative markers.  But in the absence of any baddies like that you'll be assessed purely on your credit history, your income and your affordability (how much you're asking to borrow versus your income and any existing debt).

stuwho04 said:

So last year I asked my bank to reduce the amount of credit available on my credit card

This may have had a slight negative impact - a prospective lender looking at your file won't know whether you requested the limit decrease, or whether the bank forced it upon you due to any concerns they might have had about your financial situation.  But if that was a year ago, it will not make a difference now.

stuwho04

That's good information Clive, thanks.

FindMyWayBack

MorningcoffeeIV said:

Do you mean the affordability scoring as shown on one of the CRAs, such as the Credit Club?

If so, don't worry about it. It's not a real indicator and not used in lending decisions.

That thing is useless, totally inaccurate. Ignore it, use the eligibility checkers on the lender's site of the card/loan you want to apply for.