Credit Score Improving

DisneyAce · 18 January 2020 at 3:40PM

Hello all,

First post here!

We were looking at new houses last night but found out we (I) didn’t meet the credit score criteria. We already have a mortgage and we were just looking to move house. We spent the evening looking at Clearscore and working out what we could do to improve my score. I have a few credit cards/store accounts that are nearing their limits, a couple of loans and the mortgage. My score is classed as “on good ground”.

Strangely enough, today I have had a credit limit increase offer from one of my credit cards and based on the research we did last night I am stumped on what to do. The increase is quite significant and would pay off one of the store accounts, which before last night, would be what I would have done. However, one thing I read was that the percentage of borrowing vs the limit is also a factor. So I guess I have 3 options.

Accept the limit increase and don’t do anything (this will reduce the % borrowed vs limit)
Accept the limit increase and then pay off the whole store account and close it (reducing number of credit accounts)
Decline the increase and work on reducing debt without robbing Peter to pay Paul.

Any comments, thoughts welcome!

Thanks.

Willing2Learn · 18 January 2020 at 3:45PM

I recommend you accept your credit card limit increase. However, you don't want all your cards to be 'nearing your limits' as can look to mortgage lenders as if you are already living beyond your means. You should be using your cards for all your spending on your monthly budget categories, and then pay off their statemented balances in full each month.

Pay off your loan before you go for the mortgage, as it will show anyone looking at your credit files that you can successfully manage credit accounts.

And mortgage lenders don't use your 'credit score'.

Edit: And welcome to the forum

middleclassbutpoor · 18 January 2020 at 5:21PM

Firstly - the credit score you have is a made up number and no one gets declined a mortgage based on their credit score.

You will have failed to meet the lenders lending criteria if you have tried to do an Agreement/Decision in principle.

From the limited information you have provided, I would imagine you are not yet in control of your spending or money. Your focus needs to be on reducing your credit cards and store card balance.

Do not accept the increases because that just adds temptation. Yes they may show you are no longer near your limit but the payments on the balances you have will impact your borrowing.

The plan here should be to reduce personal borrowing and when you have got these all to below 50% of the current limit, ideally repay them all. I would then approach a mortgage adviser who can assess which lender will fit your circumstances.

Each lenders will look at you and the property you are wanting to buy differently as a risk. Its important you look to ensure you are not doing too many credit checks with lenders either so by having someone who knows where to look, it will improve your chances significantly.

However - get your outgoings controlled so you can eat away at the existing debt.

DisneyAce · 18 January 2020 at 6:14PM

Thanks for the replies and advice, we will have a think over the weekend on the best action to take.

Both comments have said the lender doesn’t use the credit score, but the response back on the application clearly states it is related to my credit score, and upon speaking to them they have confirmed this.

MovingForwards · 18 January 2020 at 6:32PM

All financial institutions have their own way of credit scoring, the scores we see on our credit reports are not the credit scores the banks etc see.

Institutions credit scoring is based on their algorithms and they keep that information private, however it will include things such as salary, debt level, spending / borrowing habits, how money has been managed eg late payments/missed payments/IVA/CCJ/bankruptcy.

Ben8282 · 18 January 2020 at 6:49PM

We were looking at new houses last night but found out we (I) didn’t meet the credit score criteria.
You would hardly have found this out by looking at houses and I very much doubt that you made an application for a mortgage and had it rejected last night on the basis of not meeting the 'credit score criteria', so how exactly did you find this out?
I have a few credit cards/store accounts that are nearing their limits, a couple of loans and the mortgage
In other words, you have a substantial amount of unsecured debt. Credit/store cards nearing their limits and not one, but two, loans.
My score is classed as “on good ground”.
Never seen that one but equally wouldn't be bothered with clearscore so who knows what strange terminology they may use.
Strangely enough, today I have had a credit limit increase offer from one of my credit cards and based on the research we did last night I am stumped on what to do. The increase is quite significant and would pay off one of the store accounts,
How exactly? I am assuming this credit company offers existing customer promotional rate money transfers as that is the only way that realistically this increase could be used to repay a store card. Of course, you are actually repaying nothing just transferring the debt elsewhere.
When discussing the options, I note that you don't at any point mention saving interest by transferring the high interest storecard balance to a lower or 0% APR on the credit card so I assume that there is no promotional offer?
Option 1 will do as claimed unless you have an existing customer promotional offer on the card which can be used to reduce interest
Option 2 makes sense only if you can reduce interest and have the ability to pay the store card from the credit card. However, don't understand why you would want to close the storecard after having indicated a desire to reduce the % borrowed vs the limit in option 1.

I believe your problems regarding your mortgage arise from your debt levels. Forget robbing Peter to pay Paul. You need to actually reduce the level of debt not increase and imaginary credit score.

DisneyAce · 18 January 2020 at 10:17PM

Ben8282 wrote: »

You would hardly have found this out by looking at houses and I very much doubt that you made an application for a mortgage and had it rejected last night on the basis of not meeting the 'credit score criteria', so how exactly did you find this out?

We found a house we wanted, spoke to Mortgage company about options, they said to apply online for a mortgage in principal, this was declined due to credit score not meeting requirements. As I am a new user I cannot post a screenshot of this! I did follow this up with a call to the lender, and they confirmed this.

Ben8282 wrote: »

Never seen that one but equally wouldn't be bothered with clearscore so who knows what strange terminology they may use.

I didn’t put my actual score, this was just the summarised heading, I know this is a vague generalisation but wanted to get across that my credit score isn’t classed as poor.

Ben8282 wrote: »

How exactly?

Credit card company emailed me with an offer of credit limit increase, I have the option to accept now, auto accept by end of Feb or decline.

Ben8282 wrote: »

I believe your problems regarding your mortgage arise from your debt levels. Forget robbing Peter to pay Paul. You need to actually reduce the level of debt not increase and imaginary credit score.

I know what is effecting my mortgage application, it’s my credit score. My original question and options were my personal options, not ones posed to me by any credit or lending company. My aim is to increase my credit score and this is achieved by reducing debt.

monetxchange · 18 January 2020 at 10:38PM

I think what previous posters are trying to put across is it isn’t the credit score number you see on ClearScore that mortgage lenders will use. They’ve obviously got their own credit criteria or “scoring” that they use and they’ve used that to see you’re not in a great position at the moment/over the last few years.

But using ClearScore as a kick off to encourage you to reduce debt is a good thing. The one thing it does suggest is reducing your credit utilisation - something all lenders seem to want to see. So work on reducing the cards and loans from their maxed out position to much lower.

Maybe see this as a blessing in disguise rather than a setback - much better to get on top of your debt rather than taking more on just yet.

middleclassbutpoor · 18 January 2020 at 11:55PM

It's not your credit score effecting your mortgage. Your credit score isn't something that exists outside of the world of something clear score and all the other credit reference agencies use to help focus people on selling them products or services that could improve a score.

It's like a game for them. Thats why they will always be matching you with loans/credit cards etc. They have your data - what can we do or say to get you to buy a product through our services so we can make money..

The issue for you with the lender you chose to test the water with is that you are not a good fit for the risk they want to take. This could be for a number of reasons. If the lender has said you have been declined because of your credit score - it will be that you have failed their assessment which is specific to that lender.

Do you know how you get a better made up score? Borrow more money, repay it back and repeat. Keeping long standing relationships with lenders and where you have credit cards, demonstrating that you don't need to use the credit you have access to. The score is designed to keep you in debt.

You shouldn't be trying to take on more debt whilst you are carrying high utilisation of your debts which I think you have understood.

Just remember each lender is different and it's a skill and art to ensure you get the right lender that sees you as a good risk for your situation. Each lender will score their applicants differently and have different lending policies.

Don't get downbeat about being declined but you should seek professional advice when you are ready to get a mortgage as its something you want to get right. I have seen examples of people have failed applications because of filling out the form incorrectly too so it really does pay to get advice.

[Deleted User] · 19 January 2020 at 1:47AM

Mortgage lenders aren't using whatever number Clear Score has assigned to you. Each lender has its own set of criteria based on affordability, credit history, and past dealings with you, amongst other things.

Clear Score shows your Equifax credit history but not every mortgage lender uses Equifax when credit profiling you. Some with use Experian which you can view for free using the MSE Credit Club and some will use TransUnion which you can view for free at Credit Karma.

georgia_c · 14 February 2020 at 9:26AM

I have a question around this.... If I need to dispute something on my clear score report... do I contact Equifax then? I didnt know they were the same?

Credit Score Improving

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