ClearScore insights - lower credit use - is this true??!!

cocopop100

Hi there.  I seem to be being rejected for credit card applications and not sure why.

My ClearScore report says I should lower credit use.  I have one credit card where I'm borrowing close to the limit.  The advice says I should be at 70% of the credit limit - I'm at 79%.  Does anyone know if this is true??  I really need to use the full credit allowance but I guess I could pay some off if it would make such a difference that it would make me more attractive to lenders.  The below is what it says:

Lower your credit use

Why you're being shown this insight

You've been close to your credit limit 6 times in the past 6 months

Recent credit use near your limit

July 2023

79% 

NatwestView all recent months

How this affects your score

Keeping below 70% of your credit limit shows lenders your borrowing is under control.It may impact your credit score and the chances of lenders accepting you for new credit.

Maintain your score

keep below 70% of your credit limitkeep paying off your outstanding debt

MorningcoffeeIV

If you're clearing in full, it's not an issue.  

If you're accumulating debt, then it's not a good look.

MattMattMattUK

cocopop100 said:

Hi there.  I seem to be being rejected for credit card applications and not sure why.

My ClearScore report says I should lower credit use.  I have one credit card where I'm borrowing close to the limit.  The advice says I should be at 70% of the credit limit - I'm at 79%.  Does anyone know if this is true??  I really need to use the full credit allowance but I guess I could pay some off if it would make such a difference that it would make me more attractive to lenders.  The below is what it says:

Lower your credit use

Why you're being shown this insight

You've been close to your credit limit 6 times in the past 6 months

Recent credit use near your limit

July 2023

79% 

NatwestView all recent months

How this affects your score

Keeping below 70% of your credit limit shows lenders your borrowing is under control.It may impact your credit score and the chances of lenders accepting you for new credit.

Maintain your score

keep below 70% of your credit limitkeep paying off your outstanding debt

Your score is a meaningless number that no lender ever sees and in general ignore the other rubbish the CRAs prattle on about, one of them for example recommends that I could improve my "score", by having a debt on my credit card (my utilization should be above 1% on all my cards). 

Firstly how many have you applied for, as you say applications?

The main reason is of course that you do not meet their lending criteria, I suspect that the main one, regardless of whoever you are applying with, is that you are carrying a large amount of debt which you appear unable to clear. On that basis lending to you would potentially be irresponsible lending and also mean you are much more likely to default. 

It might be worth you heading to the Debt Free Wanabee board on the forum, posting a SOA and seeing how you can get your debts cleared, rather than borrowing more and getting further into debt. 

https://www.lemonfool.co.uk/financecalculators/soa.php

CliveOfIndia

MorningcoffeeIV has hit the nail on the head.  The key question is do you clear the balance in full every month, or are you carrying a balance from one month to the next?  The first is good, the second is bad - both from your own financial point of view, and from a prospective lender's point of view.

But you can pretty much ignore anything the CRAs tell you - especially your meaningless score.  Their view of you is immaterial, since they're not the ones lending you money.  Any lender will form their own opinion, based on your credit history (note that they cannot even see the score the CRAs give you, so ignore it).  Each lender will have different criteria.

If you're being rejected for all credit applications, the first thing is to check all 3 of your credit records.  Make sure all the data is factually correct, make sure you're registered on the electoral roll, make sure there are no adverse markers recorded against you.  But it may just be something as simple as your current debt to income ratio.

And don't go making too many applications in a short space of time, as this can be viewed negatively by lenders (the inference being that you're desperate for credit and you keep being rejected, even though the outcome of each search is not recorded).

cocopop100

Thanks very much for all your comments - I really appreciate it as I'm not very savvy about the mysteries of credit cards! :-)

Ok so I'll ignore ClearScore!

I currently have one 0% credit card with £10K on it and I pay the minimum payment each month (and the 0% runs out in Jan 2024).  Is that paying the balance off?  Sorry I'm just not sure what that means.

Do you think it's this 0% credit card debt which is affecting my attractiveness to lenders? 

MorningcoffeeIV

Paying minimum on a 0% debt isn't too much of a problem. It would be horrible on an interest bearing debt.

The total amount amount of debt is more likely an issue.

WillPS

CliveOfIndia said:

MorningcoffeeIV has hit the nail on the head.  The key question is do you clear the balance in full every month, or are you carrying a balance from one month to the next?  The first is good, the second is bad - both from your own financial point of view, and from a prospective lender's point of view.

Depends on the lender.

CliveOfIndia

If the card is on 0% interest then all of your payments go towards the capital, you're not being charged any interest - at the moment.  Of course, come next January you'll start being charged interest at the card's prevailing APR.  For this reason, you should ideally be planning to clear the balance before then.

cocopop100 said:

Do you think it's this 0% credit card debt which is affecting my attractiveness to lenders? 

It will certainly be taken into account.  Irrespective of the interest rate you're being charged, it's still a debt that you owe, and will be one factors that's taken into account when they run their affordability checks.

I do hope this doesn't come across the wrong way, but I really would urge you to take an objective look at your finances.  You have a debt of £10k on this card with only 6 months left to run on the 0% period.  Do you have savings put aside to clear the debt in full when the 0% rate expires?  And on your other thread (https://forums.moneysavingexpert.com/discussion/6462639/can-you-apply-for-credit-card-with-same-lender-if-you-close-previous-card#latest) you mention that you're looking for another card to buy some "large items".  Whilst buying things on 0% cards can seem attractive, you must bear in mind that once the 0% rate expires you'll be left paying a pretty high rate of interest.  Yes, you may be able to transfer balances to another card, but at the moment it's looking like lenders are tightening their belts, so you may not be able to get another 0% card.

Please don't think I'm being judgemental, I'm just suggesting financial caution to hopefully prevent problems down the line.

born_again

cocopop100 said:

Thanks very much for all your comments - I really appreciate it as I'm not very savvy about the mysteries of credit cards! :-)

Ok so I'll ignore ClearScore!

I currently have one 0% credit card with £10K on it and I pay the minimum payment each month (and the 0% runs out in Jan 2024).  Is that paying the balance off?  Sorry I'm just not sure what that means.

Do you think it's this 0% credit card debt which is affecting my attractiveness to lenders? 

Your issue is more likely to be the amount of debt compared to income & normal expenditure.

With interest rates as they are. Lenders are less likely to take on a large debt.

Are you looking for another card that is going to give such a high limit?

horsewithnoname

Look at credit karma instead - they take account of your overall credit usage. So instead of, in my case, “telling me off” because I have a 0% balance of over 70% on one card, they look at the fact that my overall usage is about 15% 
over all my cards. 

Mind you, said card has put my limit up so I’ll see what clearscore make of that!

CliveOfIndia

horsewithnoname said:

Look at credit karma instead - they take account of your overall credit usage. So instead of, in my case, “telling me off” because I have a 0% balance of over 70% on one card, they look at the fact that my overall usage is about 15% 
over all my cards. 

Mind you, said card has put my limit up so I’ll see what clearscore make of that!

But it really doesn't matter one iota what the CRAs (any of them) think of you - after all, they're not the ones who are lending you money.  Each lender will have different criteria, and will assign different weightings to each data point on your credit file.

All that matters is that the data held by the CRAs are factually accurate.  Other than that, it's up to the lender as to whether they view you as a good punt or a bad punt.  The CRAs can think what they like of you, it matters not one jot.