Graham Hill’s Advice On Preparing For Credit Part 3

Monday, 22. September 2014

Hi, Graham Hill here, thank you so much for visiting my blog, I hope you learn a lot and as a result end up driving a great car. In order to do so you can get all the information you need by buying my book, An Insider Guide To Car Finance or use me to finance your next car. Happy driving.

OK, we are now on the final straight, I am now going to talk about the finance application itself. But before I discuss the content there is an overriding requirement on you to answer each question accurately, if you don’t and you are found out, then you could be considered to have acted fraudulently.

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I have searched everywhere and sought legal advice but can’t find anywhere that you are committing a criminal offence when providing incorrect information on a finance application – unless of course it was the result of identity fraud/theft, which is a criminal offence and will land you in nick for a fairly substantial time.
However, the industry has gotton around this issue of fraudulent applications by subscribing  to something called CIFAS (Credit Industry Fraud Avoidance Scheme). If a lender suspects (with very good reason) or finds that you have committed any form of credit or insurance fraud they can enter your details on the CIFAS register which then also appears on your credit file for all lenders to see.
The information held is supposed to be considered advisory – alerting any potential lender to look at any application from this applicant more carefully. It can also protect you if it is known that someone has tried to make a false application by stealing your identity. They say that this is more address based than individual but I would take that with a pinch of salt!
The credit reference agencies (CRA) are not allowed to incorporate the CIFAS warning into the automated credit score nor is it to be considered to be ‘adverse’. Lenders should also not take into account CIFAS alerts when making a credit decision, simply carry out more checks on the applicant.
CIFAS goes to great lengths to explain that a CIFAS warning on your credit file won’t affect the decisions of lenders to agree a loan but in the real world if another lender has reported some fraudulent activity on your part it would certainly influence my decision if I was an underwriter and without doubt it will influence theirs.
If you are advised of a warning (you should be told before it goes on your file) or see it on your credit file, if you are not happy then write to CIFAS and the company placing the info. on your file. We are now onto the application having explained the importance of being honest. The next most important thing to do is to give as much information to the lender as possible.
You read a lot about your credit score with lots of advice surrounding your credit report, which I don’t disagree with, but just as important is a mysterious measure, used by all lenders, called the ‘Score Card’. It is the lenders’ score card that initially provides an instant acceptance or an instant decline when you make your finance application.
The problem is that the way each application is scored is so secret that often the underwriters don’t know how it is created but like the credit score on your credit file it is simply a load of points for different items on your credit application added together to form a numerical opinion of your credit worthiness.
Most lenders will have a risk committee who decide what points to award each item on the application but one thing is for certain if they don’t have the information they can’t give you a score so tell them everything. A good broker will be of great assistance as he will know which lender is most likely to approve your application. The cheap bucket shops will just propose you and hope you get through. If you don’t they often don’t have enough profit in the deal to waste time trying to get you through.
Reverting to an alternative funder or through another broker at this stage could well lose you the deal as each search on your file drops your credit score. When you complete your application form, either in handwriting or online make sure you answer every question and make it as easy as possible for the underwriting staff.
Don’t forget those that deal with your application are human beings and if they get frustrated because they can’t read your writing they may omit something that costs you enough points to result in a decline. Use capital letters and make sure your form can be read easily if completing the form manually. Each question is there for a reason so make sure you provide answers to every question. If you have middle names – show them. It helps when carrying out a credit search to find you.
Make sure that you put your correct date of birth and it is legible. These two pieces of information are used to generate a copy of your credit report and verify your current address. Most lenders now require 5 years of address history, don’t say you have been in your current address for 5+ years when you have only been there for 2 years.
They don’t just take your word, this is a verification process as they can see your address history on the voters roll with back links. If you have missed addresses it will cause concern. You should know that if a lender or leasing company is providing a very low APR or very cheap monthly lease rate they have shaved their margins so they will only accept those who are way up their score card.
Those offering higher APR’s or lease rates are more likely to consider applications from those with less than an absolutely perfect credit score. Searching out the very cheapest rate may not be the best thing to do unless you know your credit has been perfect over the last 6 years and that there are no late credit card payments or missed loan repayments or CCJ’s even if satisfied.
Having a great credit score does not mean you will automatically be approved when you make a credit application. Your credit score is based on historical events, your application uses statistics to determine whether you are likely to pay in the future. A few years ago lenders kept an open mind if you didn’t show up at your current or previous addresses as lenders would still record credit information against each of your addresses, irrespective of whether you were on the voters roll.
They would simply ask for proof that you were living at the current or previous address. These days, as the voters roll is much more accurate and is updated immediately rather than often weeks after you have moved, it is more important to make sure you are on the voters’ roll even if you have no intention of voting. Some lenders believe that if you are not on the voters’ roll it is for sinister reasons. Either you don’t want to be found or you are avoiding paying council tax, both of which would put off a lender.
One further point about your address, don’t make the job of the underwriter more difficult by only showing part of your address, omitting part of your postcode or leaving out your postcode altogether. This is often done when providing previous addresses – very irritating! Also, make sure that you show your full address, even though you have named your house Dunroamin, show the number of the property also as the name may not show up in the searches.
The form will ask if you have dependents? The secret is in the name so anyone who lives at your address who depends upon you to live is a dependent. Children or elderly relatives would be dependents as well as a wife who doesn’t work. People think this goes against you in terms of credit score but if anything it improves the score as you have responsibilities so you would take your income and commitments seriously. By the way as each lender is different I am basing what I am saying on information shared with me over the years by lenders, underwriters and leasing company directors.
As I mentioned earlier all lenders have their own set of rules and hence the reason why one company may decline you whilst another accepts you even though you have provided exactly the same information. So when it comes to dependents, having a few is more likely to work in your favour than against you.
The next question and one that is very misunderstood is address status. In other words, is your home owned, rented, living with parents etc. Owning your property will give you a few extra points but you don’t have to own your home for you to obtain credit. I recently funded a £100,000 Mercedes for a customer who lives in a rented property.
There are often times when there is no equity in a property and I have had clients who have sold a property at an amazing price and are taking their time to find a new place whilst living in rented accommodation in the meantime. Many people these days have invested in a holiday home or ‘buy to let’ property. It is advisable to let the underwriter know if you have additional equity sitting in other properties, this information can only add to the comfort given to the underwriter, especially when you are looking to fund an expensive car.
Now to the figures that you show on your application. Be very careful, whilst the underwriter may not place a great deal of reliance on the figures you provide they may ask for statements (mortgage/bank) to back them up and they also have access to data that will give an idea of property values in your area. Your mortgage details are also held on your credit file so make sure that when asked roughly what the value is of your property and what you have outstanding try to be as accurate as possible.
More important to lenders these days is your net income, some will even ask for a breakdown showing net income less your regular expenses. This is not the lenders being awkward, it is a result of the new ‘affordability rules’ imposed upon them when considering an application by the new FCA (Financial Conduct Authority). Be careful because they may ask for last 3 months bank statements or your last P60 and you don’t want either to prove that you are lying about your salary.
Also, if your income is made up of several sources such as a job but also rental income on a buy to let property, pension, annuity etc. make sure you let the lender know. Unfortunately if you use a bucket shop they won’t have time for this which could lose you a great deal.
Marital status is not so clear cut these days as more people find it beneficial not to be married to their partner for tax reasons as well as financial and practical reasons.
Whilst you may still gain a few points for being married or in a civil partnership over being single/divorced/separated it will be minimal but could make all the difference when applying for the cheapest deal where the credit bar is set very high.
Your occupation is a big points winner or loser on your application and yet applicants, as well as some brokers/dealers either treat the question with contempt or for some strange reason consider it an intrusion.
One of the worst job titles used on applications is Consultant because you could be a consultant surgeon or something very obscure like (and I have seen this) a consultant tree hugger. Whilst I don’t know the way that these titles would be scored the chances are that the title consultant will simply attract the lowest score whilst a consultant brain surgeon is likely to be close, if not top of the scale. So make sure that you are specific about your job title. Points are awarded as a result of statistics and the perceived security of the type of employment.
Make sure that whilst your job is rarely checked you describe your job accurately. You will also need to give 5 years job history, again, like moving home, if you move jobs frequently this will drop your score as will periods of unemployment. Beware, if you show yourself as being in full time employment over the last 5 years but you have put information to the contrary on LinkedIn or Facebook there is a vague chance that you could be caught out.
Your bank details need to be accurate and there are various checks that lenders can carry out to ensure that the bank account given is accurate, after all they will be taking direct debits out of this account so need to know that it exists and its status. If your account is in joint names then make sure that you say that on the application and the time with the bank can score an extra point or two with some lenders if you have been with them for a while so if you have been with the same bank for 20 years say so.
Finally we are onto employer details. Lenders have started taking more notice of the company you work for when underwriting. In the past if you have been a director of a company they have always checked out the strength of the business but with the new affordability rules forcing the lenders to take more care more lenders are taking a closer look at the strength of the business and if it looks as though it is on the brink of collapse they are as likely to decline you.
Depending on the size of the deal some will carry out a telephone check so make sure that you include their telephone number. They may even try to speak to you at work on the premise that they are checking details when in fact they want to know that you are working where you say you are (very common with mortgage applications). They are not trying to find out how good you are at your job or whether you were sacked from a previous job, they just want to confirm the information on your application.
In the past a director of a company that has been struggling has put his title down as General Manager or just Admin Manager to avoid having a search on the company but many of the lenders are more diligent these days. So there you have it, answer all the questions on the application form. Be honest and make sure that the form is legible.
Oh and don’t make the mistake that one applicant made, not one of mine of course, he was a plumber and some of his income was cash in hand and didn’t go through his bank. He had a car and a van but wanted to get a car for his wife. He knew that he could afford it but due to his cash business he knew that his bank statements wouldn’t reflect his true income so he said that the car he was getting was a replacement commitment for his own car, a note was made on his application.
As a result the deal was accepted with the condition that the finance company had proof that the finance on his current car was settled – caught out trying to be too clever. On the other hand if the new car is a genuine replacement then tell the finance company/broker/dealer this will help your application. By Graham Hill

Graham Hill’s Advice On Preparing For Credit Part 2

Sunday, 14. September 2014

A few years ago ‘Credit Repair’ services had a neat trick set out to defraud lenders. Having found a pile of adverse information on your credit file, that reduced your credit score and would therefore result in an instant decline from all prime lenders, they would set out to ‘repair’ your abysmal file. The process was simple, they would write to the credit reference agencies and dispute every piece of adverse on the file, whether it was a CCJ, default, arrears etc.
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As a result, as the information was being disputed, the credit reference agency would remove the adverse information from your file until the company who had placed the information on your file could respond with proof that what they were saying was correct. They Credit Reference Agency (CRA) would also have the Register of Judgements checked to see if the CCJ’s on the client’s file were genuine.
At the time all of this took over 2 weeks. So in the meantime the client’s credit score would shoot through the roof and he would go on a spending spree or even just apply for a car that he desperately needed but for which he had been declined for credit. That can no longer be done. These days if you are disputing anything that is recorded on your file you will need to contact the person filing the information and they must respond within a short space of time with proof that the information is correct.
If you feel the information is still inaccurate you can take it up with the Information Commissioner’s Office (ICO) and they act as arbitrator. CCJ’s are a matter of public record so it is either there or not. But this leads me to another strong piece of advice regarding CCJ’s – don’t be belligerent. If you have been to court and the judge has found against you don’t think – ‘Damn, he can wait for the money’ then wait till the bailiff is about to call before you pay it off or pay an agreed amount monthly when in fact you could afford to pay it immediately.
Provided you pay the judgement off within 1 month the judgement is removed from the register and should not show on your credit file. However, there are certain things you must do to protect your credit. If you pay the money into the court make sure you receive a satisfaction certificate then check your file to make sure that there is no mention of the CCJ. If the CCJ is recorded on your file apply to all CRA’s to have it removed with a copy of the satisfaction certificate.
If you pay the money direct to the person you owe, make sure that you receive a receipt, advise the court by sending them a copy of the receipt against which they should issue a satisfaction certificate and amend the register. Make sure that if this happens within the month the CCJ is removed from the register and there should be no mention on your credit file, if payment is made after the month is out you should send a receipt, received from the company you paid, to the court who should then issue a satisfaction certificate and note it on the public files.
This should trigger a note appearing on your credit file to say that the debt is satisfied, if it doesn’t show on your credit file, send a copy of the satisfaction certificate, issued by the court, to each of the CRA’s and they will check the register and amend your credit file. The same applies if you pay back the debt monthly, you need to make sure that the CCJ is marked as satisfied once all the money has been paid. The bad news is that the CCJ, even when satisfied, stays on your file for 6 years after the debt has been fully paid.
So even though the CCJ is satisfied, the fact is that you received one in the first place. So here’s the thing, because of the changes in consumer regulations it is important to keep your credit file squeeky clean. So do everything to get this sorted before it gets to court and avoid a CCJ. If you can’t pay a debt speak to the person you owe money to and come to an arrangement, it is easier than dealing with debt collectors. If you can’t come to an arrangement with the person you owe the money to and are contacted by debt collectors, again come to an arrangement rather than risk a CCJ by going to court, chances are you will still end up paying the same per month but by paying the person you owe the money to direct your credit score will not be affected by a CCJ.
Make sure that if a CCJ is issued it shows the correct amount and if satisfied you may still have to ask to have it removed from your file after 6 years of being on there. Another great piece of advice is always put up a Notice of Correction against a CCJ. Explain if it was a trade dispute or any special circumstances that may have caused it to be issued. As I mentioned in part 1 a CCJ affects your credit score and can result in an auto decline when you apply for credit. A notice of correction forces an underwriter to look at the file and see what you have said – it could help your case if you have a valid reason for the CCJ, if it was a trade debt not related to credit or if you are applying to have it set aside.
CCJ’s are an important item on your credit report and need to be managed. There are 1,910 consumer county court judgements issued every day so it’s not a small problem. Moving on, let’s talk about your bank statements before moving to the application in part 3. You will probably only be asked for last 3 months bank statements, the problem is they can be manipulated so you may be asked for a P60 which shows your declared income to the revenue. But that is rare so you need to make sure that your bank statements are as good as they can be.
If you have returned (bounced) items showing on the statement, that is a no no, your application will probably be declined. If you have an overdraft and you exceed it or if you don’t have an overdraft agreed and you go into unauthorised overdraft, don’t apply for finance until the last 3 months are clear. This isn’t deception it’s common sense. Having an overdraft and using it is not a bad thing, it shows that the people who know your account better than any, your bank, has allowed you an overdraft and effectively provided credit.
Years ago a credit repair company would suggest that for a 3 month period you should borrow money from a friend or relation and either drip feed it into your bank account to give the impression of higher earnings and a healthier bank balance, paying them back once your credit was approved. Or pay in a lump sum, borrowed from a friend or relation, prior to running off the 3 months statements (that won’t show as a loan on your credit file), which will show a healthy balance rather than an overdraft. It is a weakness in the way that we underwrite for credit.
In order to prepare make sure that you have last 3 months bank statements available. Most lenders will now accept statements produced on your computer if you use Internet Banking but you must make sure that the printable copies show your account details as well as your name and current address. Also make sure that if you scan and email copies you don’t miss any pages, they will check the numbers and request any missing pages or they may just assume that you have something adverse on the missing page and decline you.
You will also need proofs of address so make sure that you have at least two bills dated within the last 3 months. Scratching around at the last minute after the finance has been agreed for proofs of address may not only hold up delivery but also prevent you from receiving the finance. If you are totally paperless it would be wise to request hard copies of some recent bills if you cannot print them off yourself or you have thrown away bills after paying them.
Most lenders WON’T accept mobile phone bills, even though many consumers no longer have a traditional landline. Gas/Electricity/Water/Sewage/Landline Telephones are usually all OK but must be dated within 3 months. Some may accept a bank statement and a credit card statement, council tax bill and mortgage statement but only if dated within 3 months. You will definitely be asked so make sure that you are prepared. Your driving licence will also be asked for.
The most important thing to do is ensure that the address shown on the licence agrees with the latest address on your finance application. If it doesn’t it will cause many problems and not least of which it is illegal. The maximum fine for not having a current address on your driving licence increased this year from £1,000 to £4,000 with three points added to your penalty points. So before making your application make sure that the licence shows your current address and you have the paper part if you have a new style licence.
If you have lost your licence the lender may accept your passport as proof of ID. Again make sure that it isn’t out of date or they won’t accept it. Oh and one funder insists on having your original driving licence sent to them so make sure that your application doesn’t coincide with a holiday or trip during which you may require your licence to hire a car or as proof of ID. By Graham Hill