When best to apply for a personal loan?

Scania

Scania

Scania

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I’m looking to take out a personal loan, but wondering when would be the best time to do so to get the best rate?

I’ve been researching credit scoring etc but can’t quite fathom how it all works and fits together.

I’ve recently (this week) closed two credit cards (£4K and £2k limits respectively) as I wasn’t using them and I’m presuming these will still be showing on my credit file for a few weeks before disappearing.

I’ve balance transferred £300 off another card that has a £1500 limit to a 0% card and I’m intending to close that card also.


I’m also assuming if I apply now I’ll look a higher risk to lenders as this available credit will theoretically still be showing as available on my file and potentially get my application rejected or I’ll get offered a higher rate.

My current thinking is wait to see the closed cards disappear from my available credit on my credit report (I use ClearScore) then apply.....

Am I right in my many assumptions or am I barking up the wrong tree completely here?

:)
 
Might be using 10% of your total credit available to you, and now you are using 50%…in the lender’s eyes, the former is safer. It shows this guy can manage his money better.

The general rule of thumb is that you shouldn't close cards, especially the oldest one (line of credit, history). Just put them in the drawer. If you had to close them to stop yourself spending it, then perhaps it's a sign that this person has no self-control and perhaps we shouldn't lend him money!
 
Raymond Lin said:
Might be using 10% of your total credit available to you, and now you are using 50%…in the lender’s eyes, the former is safer. It shows this guy can manage his money better.
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Thanks, I’ve read this, but also I’ve read in numerous places (like ClearScore and Money Saving Expert) to close unused accounts?

Advice re credit scoring seems contradictory and confusing!

If I was to close the other card I mentioned, I’d have a combined credit limit of £6k on my other two cards and a balance of ~ £2200 which is at 0% until March next year by which time the vast majority will be paid off and I’ll move to another 0% deal or just clear the rest.
 
Raymond Lin said:
The general rule of thumb is that you shouldn't close cards, especially the oldest one (line of credit, history). Just put them in the drawer. If you had to close them to stop yourself spending it, then perhaps it's a sign that this person has no self-control and perhaps we shouldn't lend him money!
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Yeah i've been told similar to this as well, something along the lines of average age of accounts, hence keeping older ones open doesn't drag that age down.

Frankly i think it's a ridiculous way of how things are done, i've got an old credit card i haven't used in years, and i see it as more of a security risk with the fact that the account is technically open/available. But due to the above, i see no reason to close it.
 
Semple said:
Yeah i've been told similar to this as well, something along the lines of average age of accounts, hence keeping older ones open doesn't drag that age down.

Frankly i think it's a ridiculous way of how things are done, i've got an old credit card i haven't used in years, and i see it as more of a security risk with the fact that the account is technically open/available. But due to the above, i see no reason to close it.
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It makes sense in that it shows this person has been borrowing and repaying for years without problems. Sure there are a lot of metrics to measure a person's creditworthiness, this is just one of them. It's one that takes time to build so once build, don't chop it off yourself.
 
Raymond Lin said:
It makes sense in that it shows this person has been borrowing and repaying for years without problems.
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But your credit history shows exactly that. At least upto 5/6 years, you can see each month where balance is settled etc. It shouldn't require the account to be open/active for them to take that into consideration.
 
Semple said:
But your credit history shows exactly that. At least upto 5/6 years, you can see each month where balance is settled etc. It shouldn't require the account to be open/active for them to take that into consideration.
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That's also true, but at a glance if the computer sees the average years of credit you hold, going by numbers, it is going to be shorter. The value for that to go into the algorithm will be a lower one.
 
Efour said:
It's best to apply for one when you don't need it?
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Fixed for you. :p

There is a POV that if you can't afford to buy what you want without a loan then you can't afford to buy it with one either!

(Bit like the thread on owning an old Supercar. If you can't afford to run two, then you can't afford to run one!)
 
The actual score doesn't matter too much....lenders will look through your credit history rather than rely on the different numbers generated by experian/equifax etc

debt to income ratio is important - so really depends on how much you earn and how much debt you're currently in....unsecured debt mainly but mortgage costs will be taken in to account too

lenders can see if your cards are on 0% offers and if you're only paying the minimum each month so there's no hiding/fooling them really!
 
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Raymond Lin said:
Might be using 10% of your total credit available to you, and now you are using 50%…in the lender’s eyes, the former is safer. It shows this guy can manage his money better.

The general rule of thumb is that you shouldn't close cards, especially the oldest one (line of credit, history). Just put them in the drawer. If you had to close them to stop yourself spending it, then perhaps it's a sign that this person has no self-control and perhaps we shouldn't lend him money!
Click to expand...

I think that is old logic which no longer applies these days.

If you have tons of credit cards around and you aren't using them it can look bad depending on your income. As it can look for instance he has a £30K income but 10 cards with a limit of £5K each. So £50K available to him. There is no way I want to risk loaning to him as he could easily spiral out of control with 1 debt leading to another.

Closing accounts also scores you higher in mortgage applications. Which is the biggest loan anyone will normally take out. So closing them for smaller loans makes even more sense.

If you are using 100% of the credit available to you and say the credit card has a limit of £2K and you earn £30K a year. They might say well he is no risk at all because it's a small amount for him.

You cannot just pluck numbers out of thin air and use that as a base line for everyone. Everyones circumstances is unique.

The best time to apply for a personal loan is when you haven't applied for lots of credit or even small amounts of credit recently.

As in if you have just done 2-3 balance transfers. Was this onto new cards? If it was then now applying for a loan after 2-3 cards wouldn't look good. Again it's common sense here. You would need to give it some time before applying for more credit. A lot of credit applications within a short space of time isn't good from a lenders point of view.
 
@Scania are you signed up to anything like ClearScore or the Money Saving Expert Credit Club? These can give an indication into the loans likely available to you.
 
Did the UK credit market get insainley tight recently?

It's unholy different to here.

Im so out of touch with the UK already.
 
Psycho Sonny said:
If you have tons of credit cards around and you aren't using them it can look bad depending on your income. As it can look for instance he has a £30K income but 10 cards with a limit of £5K each. So £50K available to him. There is no way I want to risk loaning to him as he could easily spiral out of control with 1 debt leading to another.
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I'd say it's the opposite. If you've got £50k available to you and you don't spend any of it then it shows you've got some sort of self-control over your spending so could be worth lending to.
 
Psycho Sonny said:
I think that is old logic which no longer applies these days.

If you have tons of credit cards around and you aren't using them it can look bad depending on your income. As it can look for instance he has a £30K income but 10 cards with a limit of £5K each. So £50K available to him. There is no way I want to risk loaning to him as he could easily spiral out of control with 1 debt leading to another.

Closing accounts also scores you higher in mortgage applications. Which is the biggest loan anyone will normally take out. So closing them for smaller loans makes even more sense.

If you are using 100% of the credit available to you and say the credit card has a limit of £2K and you earn £30K a year. They might say well he is no risk at all because it's a small amount for him.

You cannot just pluck numbers out of thin air and use that as a base line for everyone. Everyones circumstances is unique.

The best time to apply for a personal loan is when you haven't applied for lots of credit or even small amounts of credit recently.

As in if you have just done 2-3 balance transfers. Was this onto new cards? If it was then now applying for a loan after 2-3 cards wouldn't look good. Again it's common sense here. You would need to give it some time before applying for more credit. A lot of credit applications within a short space of time isn't good from a lenders point of view.
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I just want to say that I disagree. Pretty much everything you wrote is wrong (according to my research).
 
touch said:
I'd say it's the opposite. If you've got £50k available to you and you don't spend any of it then it shows you've got some sort of self-control over your spending so could be worth lending to.
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it depends on the amount already on file and income.

you wouldn't give a loan to someone earning peanuts who has £100K available to him on cards.
 
Psycho Sonny said:
you wouldn't give a loan to someone earning peanuts who has £100K available to him on cards.
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Why not? If he's earning peanuts and has 100k available to him yet hasn't needed to use any of that credit, he's obviously very good with his money.
 
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