Wednesday, September 1, 2010

Excuse of the month – computer says no

Automated lending systems are holding back housing market

The housing market is being held back due to lenders’ reliance on automated systems, Aldermore research shows. In a survey of 200 mortgage brokers were asked what percentage of mortgage enquiries had been declined over the past six months because their clients did not achieve a sufficiently high credit score. A massive 88% of brokers confirmed clients were regularly declined by lenders’ automated credit scoring systems.

Posted by jack c @ 05:14 PM (1432 views)
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12 thoughts on “Excuse of the month – computer says no

  • ‘The housing market is being held back due to lenders’ reliance on automated systems.’

    Nothing to do with reverting back to sensible lending then, or would that claim mean dropping the bombshell at last.

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  • brickormortis says:

    I absolutely believe that this is a phenomenon affecting many. I agree that it is not to blame for lack of mortgage granting but creditworthy individuals are being rejected all the time. I tried to apply for a small loan not too long back for a car (about £5000) and despite having double digit multiples of that sitting in my savings account, not a single missed payment on anything and a credit score of 958 out of 1000 or something very similar I was rejected time and again. Had I been face to face with a bank manager who could have talked to me about my very stable career, sensible attitude to lending and savings backup (with documentation) he would surely have realised that this was great business.

    I know that I am not the only one and some circumstances simply can’t be explained to a computer. Moreover, we as humans are very good at judging based on face to face contact- bnot perfect but very good!

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  • brickor – Maybe they’ve re-programmed the systems to only lend money to homeowners (because they have collateral….)

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  • I’m regularly getting loan offers through the post. All went quiet for 18 months but this year loans are being offered again.

    bricksormortis, I’ll loan you £5k @ 7% over 24 months.

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  • @brickormortis

    “I tried to apply for a small loan not too long back for a car (about £5000) and despite having double digit multiples of that sitting in my savings account, not a single missed payment on anything and a credit score of 958 out of 1000 or something very similar I was rejected time and again.”

    According to some of my friends, if you haven’t borrowed money in the past, that can hurt your credit rating for loans (yes, stupid but allegedly true.) If you make frequent credit checks or loan applications, that will also count against you (infuriating for those shopping around for a good mortgage deal.) Have you considered that your credit rating has been damaged by ID theft or problems at a previous address?

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  • I tried to apply for a small loan not too long back for a car (about £5000) and despite having double digit multiples of that sitting in my savings account

    Bricks,

    Forgive my ignorance, but why did you want to borrow the money for the car rather than using your savings? Surely the loan interest was higher than the saving account rate?

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  • @brickormortis

    Give zopa.com a try you can apply for a loan face to face there and the rates will be better than a retail bank.

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  • Exactly, tick tock, methinks bricks is being a little disingenuous.

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  • The subtle irony of credit scoring is that to achieve the best score you have to be profitable for the lender therefore borderline delinquent on your loans (i.e. paying the minimum each month and racking up huge debts in the process).

    That is precisely why UK consumer is soffocating under an unsecured debt mountain!

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  • 9. paul

    Nailed it. Less risk more profit. Banks can make £5 per day if you are overdrawn on an agreed £100 overdraft.

    That’s not a bad return. Loan sharks? Never!

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  • In addition, most credit scoring systems used by Equifax, Experian and CallCredit are out of date, inflexible and error-prone. Just take it from me, they are.

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  • brickor – the accusation is that credit scores lead to people being automatically rejected. If you were rejected despite having a high score, then it clearly isn’t the score that is causing the rejection!!

    TBH if you have the money sat in a savings account you’d be mad to borrow to pay for it. I say mad but of course the other alternative is that you might be fraudulent. Perhaps the reference agency picked up on that, in which case – clever them!

    …and mad you!

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