How are my Affordability Scores calculated?
Each lender will have a different criteria on how affordability is calculated - we use several measures to try and mimic the checks that lenders do. The factors sitting behind your Affordability Score are:
1. Your Debt Ratio. This is about unsecured debt – credit cards, loans, overdrafts, etc. It looks at the level of debt you have in relation to your take-home pay.
2. Your Credit Utilisation. This is taken from your credit report and is a measure of how much of the credit available to you you've used. For example, this score will be quite poor if you're maxed out on all your credit cards.
3. Your Disposable income. This looks at the money you have left each month. It takes the income you told us you earn, and then takes off your rent or mortgage payment, then estimates other expenses to estimate how much you have left at the end of the month.
Even if your Affordability Scores are poor, you may still be eligible for individual products but as always, you need to carefully consider whether you actually need a product (and can afford to pay it back) before taking it out.
You can see a full breakdown of how each of these is used in the 'Affordability' tab in Credit Club.