Credit rating and debt repayment

MrFrugalFever

[Deleted User] said:

MattMattMattUK said:

missbee79 said:

Thanks. I earn around £35k and hope to arrange 8k personal loan ASAP to repay my friend. I still have a barclaycard with around £1500 balance  -this is 0% until May 2024. I expect to owe £500 if i maintain the payments i am currently paying. (I cant afford to increase at the moment) The cards I have paid off are Aqua - 50% APR (I would really like to close this down). Tesco and Capital one.  Ideally I would like to cancel these cards but need to improve my score ASAP but wasn't sure if not utilising my available credit would increase my score.

Your score is meaningless, no lender ever sees it, it is a marketing gimmick, ignore it entirely!

The next question becomes can you afford a loan? You say you cannot afford to increase payments to the card balance outstanding, which would indicate that you will likely fail the affordability part of any application for a loan. If you cannot afford to pay more on the card then how do you plan on finding £200+ a month for the loan?

By the sound of it your friend has given you a lifeline here, I understand the desire to repay them quickly, but also recognise that if they were willing to do this then they will also want to see you get yourself straight financially, that means getting yourself on a solid financial footing so that you can repay them both the money they lent you, but also the love they obviously have for you by giving you the opportunity to get things sorted financially.

It may be worth you positing an SOA to see where you can cut back and focus on minimising your expenditure.

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

That's not entirely true about lenders never seeing the scores.

I worked for a motor finance company and was the Head of the Underwriting department, we saw the score of one of the credit reference agencies every finance application we looked at.

If the score was of a certain level, we knew the customer was near as dammit perfect so we'd lend on that basis as well as looking through the whole credit application of course. The score indicated to us the Underwriting team that the customer was good for a lend or not, this being done at speed, say 2 or 3 minutes to make a decision on lending upto 20k.

Scores derived by the credit brokers/agencies are fairly universal scores and not specific to each lender, however, as you say, lenders can see a 'score' of some description, which forms a basis of their underwriting decision. A large proportion of applicants will be assessed electronically and automatically. Data will be encoded and the computer system will spit out an answer.

Each lender will do things very slightly different, the one I work with very closely is an arm of a major mainstream bank and it is interesting to know what they can/can't see and the process of application.

In regards to the OP, I would suggest closure of Aqua purely on the basis of the ludicrous APR, but keep others open (unless you absolutely cannot control your spending).

I'd recommend heading over to the Debt Free Wannabe forum boards, i've been there and the help/support is great.