Credit Scoring Questions

stoozers and rate tart's questions answered

Anyone who borrows money or who intends to borrow it, would be advised to have a very basic acquaintance with the role of CRAs and what sort of factors affect a credit score. However, those who are involved in stoozing and rate-tarting should understand it as fully as possible, in order to maximise their use of good credit card offers. Since Stooz and Clariman have been involved in stoozing, there have been some important credit scoring questions which have not really been answered before with any certainty. With the help of Experian and our industry-insider, we can now answer some of these important questions.

Stoozers' Questions

What has the biggest effect on my credit score having high available credit limits or maxed out credit limits?

Example: how would a lender rate someone who has used £40,000 of credit out of £40,000 available (i.e. 100%), vs someone who has used £40,000 of credit out of £60,000 available (i.e. the same debt, a higher available credit but lower percentage used)?

Determining what has the biggest effect on a person's credit score is very difficult as it depends on the individual lender, whose scorecards and policies vary. What is increasingly important to lenders is the total level of borrowing in relation to affordability. There is now an increasing scrutiny among lenders over this issue, with Barclaycard and other lenders recently announcing plans to share behavioural data about credit card accounts in order to help spot people beginning to struggle - such as those paying only minimum payment over several cards. Therefore lenders primarily want customers who pay on time so they will look very closely at payment performance data above all else.

Lenders don't like either maxed out cards or lots of available credit, but all things being equal, I think the latter is better than the former. More importantly, though:

£40,000 on a single card with a £60,000 limit is better than £40,000 on 10 cards with balances of £4,000 and card limits of £6,000

£40,000 split equally over two cards with limits of £30,000 each is better than £40,000 on one card that has a £40,000 limit and nothing on a card that has a £20,000 limit.

Should I close my credit card when I have finished stoozing with it or should I leave it with a nil balance?

It is important that you close down any credit cards that you no longer use; otherwise new lenders might be unwilling to give you further credit. You should also bear in mind that a lender is unlikely to accept a new application from someone who already has one of its cards but does not use it. Closing unused credit cards is not only a credit score issue but also an important identity fraud one. People should close accounts they no longer use or else they can become easy prey for the identity fraudster.

Looking at it from a credit score point of view I would say that it is better to close a credit card after you have finished stoozing with it. For credit scoring, available credit is normally calculated on a card by card basis, not at an overall customer level, so there is little point having some cards maxed out and another one with a nil balance. (of course, if you have a card with an anniversary 0% BT offer, like the current Egg Green card, then you may wish to retain it for the anniversary) Although the number of credit accounts open may have an impact, underwriters are more likely to consider the total available credit. On the other hand, you might get some good existing customer deals if the card is kept open.

Do lenders look for stoozing patterns in people's credit files?

This is something we do not know. Lenders can see how many credit cards a person has used in the past six years so in theory they could. Unless you are regularly switching a stack of cards, you won't collect an abnormal number of credit searches, as they aren't actually held for very long (1-2 years).

No, not to my knowledge, although stoozing looks like a cross between rate tarts and those who are in debt, so stoozing might get caught up as either of those segments. Analysis tends to be performed on tranches or segments of customers, so unless a lot of people in a tranche or segment are stoozing it will be hard to pick up. It could become an issue if a lot of stoozers using the same lender have similar profiles, otherwise it is still such a small activity that stoozers are just considered to be smart rate tarts who don't roll over (i.e. don't pay interest after the introductory rate) and that the cost of these customers should already be built into the lender's offering. Also, the number of searches a person has is rarely an issue in scoring unless the person's application is already borderline. Lenders are essentially looking for creditworthy customers, so they would be unlikely to be put off, aiming instead to keep you as a customer with good service and loyalty schemes etc.

How can the stoozer maximise his/her ability to get credit

A stoozer can maximise their ability to get credit by paying existing credit on time and generally using it sensibly. Being on the electoral roll is very important - lenders use this to check your name and address. Lenders will also rate stability so people who are in a relationship, living in their own home and have been in the same job with the same bank for several years will probably gain more points in many scoring systems than nomadic renting singletons. Also, a person's disposable income is important but people shouldn't be tempted to misrepresent their personal details because the anti-fraud systems that lenders use are very effective. If you decide to appeal a credit refusal or a low credit limit, then you will have to supply supporting evidence of your income

In general I think the suggestions that stoozing.com gives is sound. To give a detailed answer to a general topic is always difficult. However, the lenders often look at searches and accounts opened in the last 3 to 6 months, so if you intend on making more than one application in the next 3 months, you might as well do the second application before the first card is reported to the CRA (which is normally within 4 weeks of account opening). That way, the second application will only take into account the extra search, but not the extra card, nor any debt already placed on it by the stoozer.

Is there any benefit to making some purchases on a stoozing card at the end of the 0% period? Will that make it harder to spot that it was just a stoozing card?

This is something we don't know.

There is no particular benefit in doing so, but you may get offered some deals for existing customers if you keep the card open.

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