Excellent credit but poor affordability

Penglady

I'm genuinely confused about how to combat this. I have an excellent credit score with all of the main Credit Agencies but my 'affordability score' is low because it says I have very little disposable income. I earn £37K which is 2,500 a month net. My rent is £800. I have just one credit card payment of £120 then the usual household bills. I have no other debts at all - no car payments, no loans, nothing. My 'disposable income' is enough to pay all my bills and usually save a little as well. I have £32,000 in savings. What am I doing wrong?? 

Myci85

Affordability score according to who? Are you trying to apply for more credit or just seeing something on a credit report? If the latter I don't think it matters what someone else thinks of your affordability if you know you are comfortably covering your bills and saving!

MattMattMattUK

Penglady said:

I'm genuinely confused about how to combat this. I have an excellent credit score with all of the main Credit Agencies but my 'affordability score' is low because it says I have very little disposable income. I earn £37K which is 2,500 a month net. My rent is £800. I have just one credit card payment of £120 then the usual household bills. I have no other debts at all - no car payments, no loans, nothing. My 'disposable income' is enough to pay all my bills and usually save a little as well. I have £32,000 in savings. What am I doing wrong?? 

Your credit score is totally meaningless, no lender ever see it, it is just a way that CRAs try to gamify selling you new financial products. Savings have no impact on affordability, again no lender can see them and they do not count towards affordability because you could go and spend them.

£37k pa is £2,513 pm with zero pension contributions, factor in a normal 5% and that brings it down to £2,390. Your rent, plus council tax, utility bills all factor in, as does the running cost of a car, fuel, insurance, maintenance, food, entertainment etc. The fact that you say it is disposable income* give you enough to "usually save a little" does not indicate that you have much headroom in your finances, you are not saving £500 a month for example, which would indicate you had more money left over each month. On top of that paying £120 a month on credit card indicates that you have a not insignificant debt, that will also factor in. 

What are you trying to borrow money for, something specific, or just seeing if you can get a loan/card?

*not actually disposable income, which is money left after tax, discretionary is after essentials, essentially what you mean is spending money. 

flaneurs_lobster

What are you trying to combat?

Do you actually need to apply for a credit product or are you simply worried about a low "affordability score"?

It's a made up number, like your "credit score". The sites you see these numbers on belong to credit brokers, they make their money by you signing up to the credit products (loans, credit cards, HP) that are advertised on their sites.

They suggest that you signing up for more credit will "improve" your made up scores, and it probably will!

Your "score" goes up - you're happy.

Credit Reference site makes commission on the sale - they're happy

Loan company have signed up another customer for more debt - they're happy too.

Everybody wins, isn't Capitalism fantastic!

born_again

Any affordability is assessed by a lender when you apply for credit.

Do not believe anything the CRA say.