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Original poster

Why was my loan refused??

46 replies

ladyvivienne · 25/07/2023 15:32

HSBC - wanted to up my current loan a little to finish off our house renovation (by 10K if that matters - total loan value still under £20k)

It's been rejected.

Phoned HSBC they've said it's not them its the underwriters - and gave me all 3 details and phone numbers so I could 'find out why'

All 3 agencies have come back and said there is ZERO problem with my information. Experion suggested I close an old credit card that wasn't being used but said other than that literally nothing showing.

What now?!

I seemingly have 'bad credit' yet the agencies say I don't!

OP posts:
TeaKitten · 25/07/2023 15:35

Is it affordability? Have you looked at your credit score online?

BasiliskStare · 25/07/2023 15:36

Can you phone HSBC back and tell them what Experian said ?

Ohdearwhatnow4 · 25/07/2023 15:37

Doesn't mean you have bad credit,could be the opposite. We went for a loan and my DH was declined, despite owning a house outright and having a really well paid job, I applied and got the loan although I'm a sahm. Ask the bank why and they said it was because I always paid my debts which was true but DH didn't have any debt so couldn't prove he could pay them off. I never bothered with loan in end.

Ohdearwhatnow4 · 25/07/2023 15:37

Thus was several years ago so things might of changed now

GarlicGrace · 25/07/2023 15:40

Each lender has their own algorithm. Their criteria vary a lot. Some only lend to applicants with a mortgage, some reject single people, all sorts of things. Try a different lender.

BarbaraofSeville · 25/07/2023 15:46

Maybe they don't think borrowing £10k is a small amount of money?

Could be affordability - you'll be adding to your outgoings so they'll be thinking about how you'll pay it back.

They could be looking at it like you can't afford it, because if you could, as in you had spare money in your budget, you'd have savings, and you'd use them instead of needing another loan.

Could you try a credit card? Look for an interest free spending card and put all you can on the card. If you need to pay for labour, you'll need to be a bit creative by paying for things like groceries, travel and other general spending on the card, to free up money to pay the tradespeople.

Original poster
ladyvivienne · 25/07/2023 16:01

Looked at all of my credit reports online. All excellent.

It would be adding an addition £80 a month to the existing loan. Totally doable as my wage has gone up by £300 a month.

Extra pissed off now as the very helpful man at one of the agencies said I should close one of my credit cards as it being sat there unused wasn't helpful - bloody done that and now it looks like that's totally the wrong thing to do! mind you, we barely have anything sitting on the other two credit cards (under £300 in total) so it really shouldn't matter much.

Just really annoyed as it's obviously a 'hard search 'and for no 'reason' as to why it's been rejected.

Why can't they just bloody well tell you??

OP posts:
MammaTo · 25/07/2023 16:08

Sometimes it’s not about credit scoring, it can be about affordability too. I used to process loan/credit card application but recently changed roles but colleagues have explained that criteria for lending has got really strict lately due to the COL crisis, banks are too willing to lend money especially unsecured.

Original poster
ladyvivienne · 25/07/2023 16:12

But it is totally affordable for us! Which if I could actually explain and put out to a person that would be great!

My friend seems to think it's my new car loan under my name (as husband was away at the time) - which sounds a lot in relation to my own wages, but we run a household pot here, husbands wages and mine go into one big account and all the bills come out of that.

OP posts:
Original poster
ladyvivienne · 25/07/2023 16:14

I did have loads of savings but they got eaten up during Covid.

We're saving about £400 a month but I don't want to wait another 2 years before having the luxury of downstairs that has flooring, a kitchen and a working window. The new total loan would only be £350 a month IF they had said yes.

OP posts:
YoSof · 25/07/2023 16:19

ladyvivienne · 25/07/2023 16:12

But it is totally affordable for us! Which if I could actually explain and put out to a person that would be great!

My friend seems to think it's my new car loan under my name (as husband was away at the time) - which sounds a lot in relation to my own wages, but we run a household pot here, husbands wages and mine go into one big account and all the bills come out of that.

That could be exactly why.

A) you’ve taken out a high amount of credit very recently

b) if the loan was requested in your name only, and the car is in your name only they won’t take your husbands earnings/contributions into account?

takemetothespace · 25/07/2023 16:19

Are you sure? its £80 extra for another 10k loan ? is it personal loan or further advance on your mortgage?

Hugasauras · 25/07/2023 16:21

Affordability is a set formula/calculation based on the information they have, so it doesn't really matter whether you think can afford it or not within your own budget, only whether the formula they use says you can afford it (hence why plenty of people are stuck paying higher rental costs because they can't get a mortgage, even though it would be cheaper for them [granted maybe not right now]). All they can do is process the information they have and run the calculations based off those figures and it'll either pass or fail.

Hugasauras · 25/07/2023 16:22

Can you not apply for this loan with your husband so his income counts? Seems weird to have two loans in your sole name when he is the higher earner.

Original poster
ladyvivienne · 25/07/2023 16:26

It's not two loans - it's extending the loan we already have - which is a joint loan in both names.

I asked HSBC could my husband apply instead then - and she said yes, but only in 3-6 months time.

Yes - it's an additional £80 a month for the borrowing. Strangely if I wanted to borrow anything up to £5k more, my current repayment amount goes down! No, that's makes no sense to me either.

OP posts:
Quveas · 25/07/2023 16:35

Ohdearwhatnow4 · 25/07/2023 15:37

Doesn't mean you have bad credit,could be the opposite. We went for a loan and my DH was declined, despite owning a house outright and having a really well paid job, I applied and got the loan although I'm a sahm. Ask the bank why and they said it was because I always paid my debts which was true but DH didn't have any debt so couldn't prove he could pay them off. I never bothered with loan in end.

Similar happened to me. I have three properties owned outright, four credit cards, two bank accounts that have never been overdrawn, and savings. I closed a credit card account, applied for another card, and it was refused - when I asked why the hell this was (excellent credt score) it was because I have no debt at all and haven't had for many years. Ridiculous state of affairs when having no debt makes you a risk despite loads of evidence to the contrary. Their loss - applied for another card and they fell over themselves to sign me up.

christmastreefarm · 25/07/2023 16:51

Depends when you took them out - if you only recently took the original loan plus you have recently taken out a car loan it's probably flagged that so a 3rd loan will be deemed a risk and you relying on credit. On my credit report via credit score it looks at finance agreements you have. Any more than 2 downgrades my score I think.

Elsiebear90 · 25/07/2023 16:54

Don’t close old credit cards, what often happens is your available credit goes down and your credit utilisation goes up, which is a bad thing. It’s better to have some old credit cards with no debt on if you still have credit card debt as your overall utilisation will be lower.

Jmaho · 25/07/2023 16:58

It's likely the recent large loan you have taken out. Your debt to income will be high
It doesn't matter that you share finances with your husband. The loan is in your name so you are fully liable for the debt

DrHat · 25/07/2023 17:05

Hi. My friend in insurance tried to explain this to me in simple terms and did a good job so I will try to pass on. The reason having empty credit cards sitting around is bad is because underwriters look at what you have available at any given time. So, if you have a 10k loan and over the 3 credit cards you have 20k available should you need it (even if you are not using it), you could effectively end up 30k in debt over night. Taking an extra 10k loan then makes that total 40k which may be what they then deem unaffordable. In their eyes, you have access to other money so why do you need a loan kind of thing. So getting rid of empty credit cards is a better thing is what he told me….
On another note, we use HSBC and I have since my first bank account and they are the least likely to ever lend us a penny despite no debts and good earnings 😂

WelshNerd · 25/07/2023 17:16

What is you current income and how much unsecured debt do you have? Also how much of that debt was taken out in the last 6 months?

Original poster
ladyvivienne · 25/07/2023 17:38

Income is £30k, car loan was for £17k, and yes taken out in the last 6 months. It's got to be that really. But it's misleading because we have a 'whole pot' approach to money so in reality it's not just me that's paying the car finance of £300 a month.

OP posts:
Original poster
ladyvivienne · 25/07/2023 17:39

I'm hoping closing the old credit card is a good thing - i've heard both sides, one saying to do it, the other to not.

In total, I had £10k of credit available on all three cards...so losing £10k of available credit. But like I said, we don't owe very much anyway. Cards are always cleared off (maybe they shouldn't be?!)

OP posts:
WelshNerd · 25/07/2023 19:27

You earn 30k. And have 27k unsecured debt which you wanted to increase to 37k. Plus the potential to increase that to 47k by using your credit cards. I used to underwrite unsecured loans and it wouldn't be considered responsible lending to over leverage in such a way.

And legally it is just you paying the loan. If you were to default the lender would have no recourse against your husband. Does he have a higher income than you? If you have a family pot which you think makes it affordable, could he apply?

TeaKitten · 25/07/2023 19:30

WelshNerd · 25/07/2023 19:27

You earn 30k. And have 27k unsecured debt which you wanted to increase to 37k. Plus the potential to increase that to 47k by using your credit cards. I used to underwrite unsecured loans and it wouldn't be considered responsible lending to over leverage in such a way.

And legally it is just you paying the loan. If you were to default the lender would have no recourse against your husband. Does he have a higher income than you? If you have a family pot which you think makes it affordable, could he apply?

Why is it legally just her responsible for the loan when it’s a joint loan in both their names?