How to Improve Loan Affordability Score?
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Hi Everybody,
I'm hoping somebody can help me here as I seem to have made an error in my judgement about how lenders judge applicants, having just joined the Credit Club.
For a number of years now I having been planning to apply for a large loan - £23K over 7 years at around £300 per month. As a result I have consistently saved £300 per month into an ISA for about 5 years to prove that I can afford the payments.
I then joined the Credit Club to find out that although my credit score (whatever that is worth) and everything else is great, my affordability score is low and it states I am unlikely to get loaned such a large amount. My outgoings are very low compared to the 'average' and I CAN afford it, but I have learned that apparently lenders don't see savings, and judge me by the average outgoings of others, and that perhaps I could improve my score by reducing any existing debts?
This makes me think - would I be better to use a little bit of the savings to clear my credit card and transfer the rest into my current account, if this would help show I have 'spare cash' and no other debts?
Even aside from all this I still have two lenders on the Credit Club list with a 90% of accepting me. It's just this is really important (obviously!) and I don't want to mess it up and get declined if there is something I can do to improve my chances. Although I have had a responsibly used credit card for years this will be my first loan application and I'm not familiar with how it all goes.
I hope one of you knowledgeable types can help me.
Thank you!
I'm hoping somebody can help me here as I seem to have made an error in my judgement about how lenders judge applicants, having just joined the Credit Club.
For a number of years now I having been planning to apply for a large loan - £23K over 7 years at around £300 per month. As a result I have consistently saved £300 per month into an ISA for about 5 years to prove that I can afford the payments.
I then joined the Credit Club to find out that although my credit score (whatever that is worth) and everything else is great, my affordability score is low and it states I am unlikely to get loaned such a large amount. My outgoings are very low compared to the 'average' and I CAN afford it, but I have learned that apparently lenders don't see savings, and judge me by the average outgoings of others, and that perhaps I could improve my score by reducing any existing debts?
This makes me think - would I be better to use a little bit of the savings to clear my credit card and transfer the rest into my current account, if this would help show I have 'spare cash' and no other debts?
Even aside from all this I still have two lenders on the Credit Club list with a 90% of accepting me. It's just this is really important (obviously!) and I don't want to mess it up and get declined if there is something I can do to improve my chances. Although I have had a responsibly used credit card for years this will be my first loan application and I'm not familiar with how it all goes.
I hope one of you knowledgeable types can help me.
Thank you!
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Comments
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Don't worry about the score. It has no meaning.
Lenders will look at your current debt, plus the amount you are ask for and compare that with you income. You'll probably need to be looking at a 50-60k income for that size of loan.
Are you in the right sort of ballpark?0 -
How much is your credit card debt? The fact is, if you are saving £300 per month and your card debt is rising by £300 per month, that doesn't make you an attractive lending proposition.
As a rule of thumb (but not always) lenders don't like to lend you more than 50% of your annual earnings on an unsecured loan. So you may struggle if you don't earn in the region of £50k.0 -
What doe's the card debt consist of ? Is it just day to day spending ?
Maybe look at your spending.0 -
Hi guys and thanks for getting back to me.
No, my income is around half that. My credit card debt is around £1K and coming down steadily, but I guess I naively thought that if I could show I could afford the payments AND reduce my debt that it would go in my favour.
So do those 90% chance offers not mean anything then? Is this really just a hopeless dream? One was with the AA and the other with the Post Office if either of them look a little more favourably on me...0 -
Every lender has different criteria, so no one can say it's definitely impossible.
impossible.
It's just very unlikely.
Not being able to clear a £1k debt will be a very concerning factor for a lender.0 -
Hi guys and thanks for getting back to me.
No, my income is around half that. My credit card debt is around £1K and coming down steadily, but I guess I naively thought that if I could show I could afford the payments AND reduce my debt that it would go in my favour.
So do those 90% chance offers not mean anything then? Is this really just a hopeless dream? One was with the AA and the other with the Post Office if either of them look a little more favourably on me...
So your wanting to borrow 23k on say 12.5k wage ?
Dont like your chances to be honest. How much have you saved so far ?0 -
Sorry, I didn't write that very clearly. My income is around £21-22K (as in around half of £50K). My current savings are £10K.
Hmm.
Thanks guys. I guess I've got nothing to lose by applying then eh. Just out of interest, would it make any difference (even slightly) to clear the credit card and transfer my ISA across?0 -
It would certainly be an improvement.0
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Well that's the card paid off and my bank balance increased anyway. I guess I was also under the mistaken impression that a little bit of debt is a good thing to see in their eyes. Oh well, this is how we learn I suppose.
Thank you all for your kind and speedy responses. We shall see what the future holds.0 -
If you need £23,000 can you not use the £18,000 that you now have in your ISA and just borrow the other £5,000?0
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