Monday, 25 January 2016

Applying for credit these days...

The arse covering is strong with this one.

To be clear, I am not in a position that I have to apply for credit - I do have a mortgage, but largely because I have such a stunningly good rate on that it is is almost silly to repay it. I am, finally, at this stage in my life, reasonably well off. I too am surprised at this, and I know it could change any day - the industry I am in is very variable, and running a business is always a risk. I have had a lot of very much not well off years too and so am reaping some of the rewards of that at last.

But, my daughter wants a loan - and I am trying to make them all stand on their own feet and not just scrounge off me all the time. Sadly she is just starting with a job and rented house, and so she is not good on the whole credit rating, so needs a guarantor. It is not Wonga, thank arbitrary deity, but not a brilliant rate, but she will learn.

Being guarantor, I am happy to do, but it means I end up going through the whole fiasco of credit checking as if I was getting the loan!

It is a fiasco and arse covering exercise and not really a solution. OK, maybe some people are stupid enough to call up and give actual details and be turned down, but even the thickest of people will soon realise that you can just make shit up.

At the end of the day there are two types of information - things they can verify, and things they cannot. Now, having had the conversation, they can verify exactly what I pay on my mortgage each month - so WTF ask me that! They can also make good guesses at food, council tax, TV licence, and so on. What they do not seem to actually know, and what really matters, is income. I was honest as I had no reason at all not to be, and having stated my income they could have cut the whole process short on the basis that anyone earning that much is not going to have any problem with the loan repayments.

But no, they insist you cover every detail, including that apparently I have a mobile phone account with someone that has a £3 balance. I suspect it is a credit balance on some pay as you go type thing from years ago, but that needs to be explained!

The real stumbling block here was mortgage payments. I have a base rate plus fixed offset mortgage. So guessing payments over next 5 years, which is what they wanted, depends entirely on the Bank of England base rate changes over next 5 years.

I am sorry, but I do not have a crystal ball - I cannot predict that. It is not reasonable, or helpful, to ask me that!

They moved on to the "what would you be happy with", well, (a) I would be happy if it stayed as now, and (b) it does not matter if I am happy, if the rate goes up I pay more - I have a contract. As I explained, if the rate was not reasonable I'd start clearing it damn quick.

I ended up along the lines of "what is the balance left each month - I'd be 'happy' with mortgage rising to consume all of that"... It is a nonsense question to ask, and clearly does not actually represent any sort of "responsible lending"...

Being a responsible lender should not be covered by an arse covering script like this, and when anyone that can afford to pay has to go through this, they should have some simple short cuts. I should have billed my hourly rate for this as it was well over an hour.


  1. As I recall, this is part of the latest "bolt stable door years after the horses bolted" exercise after the sub-prime mess: before granting a mortgage, they have to prove they've made you jump through hoops to prove you can afford the repayments. Even if the new mortgage is just you moving to a cheaper rate ... leading to the utter insanity of being forced to stay on a more expensive mortgage, because under the new rules, you "can't afford" the cheaper one!

  2. I'm so glad I have no debts these days. I do remember when I took out mortgage, car loan etc. in the 1980s and 1990s that no-one really asked any questions. The mortgage had to be under some multiple of my salary but that was all. Today I pity people starting out, we've gone from one extreme to the other.

  3. It seems unfair that guarantor loans have worse rates than the guarantor borrowing directly as the risk to the lender is based on the guarantor's credit rating rather than the person they are lending to.

    1. Well, lower risk as both would have to default.

    2. I would expect that in a significant number of cases they have trouble extracting the money from the guarantor as they never expected to have to actually pay out

  4. The Credit Reference Agencies are beginning to collect rental data as evidence of the customer's ability to pay their debts. For now it's voluntary so most people, especially with private landlords, don't get their data collected, but eventually the fact that you paid £800 pcm for six years will actually demonstrate to a bank that you'd be able to pay back a loan and not blow everything at a casino and then plead poverty.

    Or of course, the fact that you were in arrears for six months and then got kicked out will destroy your credit and make it hard to get a new place without paying the whole lot up front.