Credit Ratings When Living Off ISAs & Drawdown

[midgesgalore]

Since I retired early at 57 to care for my wife I have been living off savings with the only income of carers allowance (for the duration of care) and also my late wife's sickness (now widowers) pension.
Back then credit was not a problem as there was a regular and traceable income if proof was demanded for a credit type purchase.
Moving on I wonder what people do to back up annual income if they are looking to cover, say, a car or HP agreement or to justify earnings for a credit card application with a decent credit limit?

Now, 10 years down the line, I paid a big bill this week and wanted the advantage of a further month on a credit card but to get there the credit card company justifiably asks your salary. It is kind of hard to justify notional ISA dividend withdrawals (as and when required) and state pension and somehow convince lenders of the firepower behind that. I just paid my bill from cash savings in the end.
How do others go about the issue of proving a decent and reliable salary from dividend withdrawals?

midgesgalore

[fisher]

I apply for credit cards every year (0% on purchase cards). I think the applications usually ask for your gross income now (rather than salary), or sometimes net income. I always select "retired" as my job title.

For the last 12 months I calculate the following, regardless of whether I have withdrawn the income or reinvested it:
I add up all my annual ISA dividends and count them as gross income.
The first 12.5k in dividends from my SIPP I count as gross income (as it's within the personal allowance).
The rest of my SIPP income I count as net income (and divide it by 0.8 to get a gross figure to add to the gross income).
Dividends from taxable accounts I treat as net income as above.
Interest I count as gross income as it is less than 1k.
Solar panel FIT income I treat as gross income.

I have all of this detailed in a seperate spreadsheet for each credit card application so I can see what I told them when I applied.

I have never been asked to prove my income following a credit card application.

[kempiejon]

I apply for credit often too.
I have an idea of my investment dividends, and profits, what the SIPP offers and I make a guestimate. Never been asked to prove it. Never really had a problem getting credit though Barclaycard recently gave me a no with their soft search via my credit reference agency. I followed it up via my Barclays online banking log in and was delighted when a shiny new platinum card hit the door mat. 20 months of interest free stoozing cash.
In my experience of credit cards, keeping a stable of cards and annually asking for credit increases and you can soon have access to several multiples of salary.

to justify earnings for a credit card application with a decent credit limit?

For others not yet retired get the cards when you have suitable earnings and keep them. When my circumstances changed I didn't tell any of my banking institutions and still have all my banks, overdrafts, credit cards etc.

How do others go about the issue of proving a decent and reliable salary from dividend withdrawals?

Never been asked to prove it. I am sometimes asked to include other household income - SO is employed so add that gross in. Which means some credit cards applications have half the income of others.

[Gerry557]

I tend to put something on credit just to have a history of paying off. Usually its something I would probably just pay in a lump but I can have interest free.

Garden furniture or a new sofa for instance. Usually you can get them for multiple years.

Strangely I'm informed to up my credit card limit amounts. I think it wanted me to stay under 25% total usage. So loading it up and paying it off at the end of the month counts against you.

You can download credit agency apps that offer suggestions and should give you a rating but I wonder if they are a bit up themselves really.

[Alaric]

In my experience of credit cards, keeping a stable of cards and annually asking for credit increases and you can soon have access to several multiples of salary.

I think Banks are now asked to set aside capital based on the total credit card borrowings they are theoretically liable to finance. As a consequence, some at least, will cut credit limits foir existing customers. It's something of a contrast to the past when they would offer to increase limits every couple of years.

[tacpot12]

Lloyds Bank have just written to me to say they are going to increase the credit limit on my credit card despite my only income being from drawdown and property rental.

[midgesgalore]

I apply for credit cards every year (0% on purchase cards). I think the applications usually ask for your gross income now (rather than salary), or sometimes net income. I always select "retired" as my job title.

For the last 12 months I calculate the following, regardless of whether I have withdrawn the income or reinvested it:
I add up all my annual ISA dividends and count them as gross income.
The first 12.5k in dividends from my SIPP I count as gross income (as it's within the personal allowance).
The rest of my SIPP income I count as net income (and divide it by 0.8 to get a gross figure to add to the gross income).
Dividends from taxable accounts I treat as net income as above.
Interest I count as gross income as it is less than 1k.
Solar panel FIT income I treat as gross income.

I have all of this detailed in a seperate spreadsheet for each credit card application so I can see what I told them when I applied.

I have never been asked to prove my income following a credit card application.

Thanks for your approach to this fisher
I keep this kind of continuous record automatically with my portfolio spreadsheet and I can tell this total position in a few keystrokes.
My spreadsheet month variable can look ahead a few months, with reasonable accuracy, how much to expect using declared dividends manually extracted from the "dividenddata" site. Also my historical income is logged with various data items synthesised. All of that is not a problem.

Its the

I have never been asked to prove my income following a credit card application.

that surprises me - but I am quite naïve (or maybe not) and hence my query.

I have not actually started withdrawing anything from my investments yet - just an excessive cash balance I built up in case my wife had an extended stay in care in the latter years and happily for her wellbeing I was able to have her at home all but a couple of weeks from end of life.
So if questioned I would have been able to show regular cash flow into my working current account.
I guess my answer is that no-one asks for proof.


Thanks,
midgesgalore

[midgesgalore]

In my experience of credit cards, keeping a stable of cards and annually asking for credit increases and you can soon have access to several multiples of salary.

Sound advice kempiejon

For others not yet retired get the cards when you have suitable earnings and keep them. When my circumstances changed I didn't tell any of my banking institutions and still have all my banks, overdrafts, credit cards etc.

I would say that is a good call. I always had a credit card but it was a card where my wife was the initial holder with me as an add - on. Fortunately I had the wit to get my own card and wound the shared card down. That is where I am at the moment however the card company owners are divesting this part of their business so I can get cracking with a backup before this date in case I don't like the new terms.

midgesgalore

[midgesgalore]

Lloyds Bank have just written to me to say they are going to increase the credit limit on my credit card despite my only income being from drawdown and property rental.

I think I'll apply there first

midgesgalore

[midgesgalore]

Strangely I'm informed to up my credit card limit amounts. I think it wanted me to stay under 25% total usage. So loading it up and paying it off at the end of the month counts against you.

That's how I ordinarily operate my CC however with the temporary >90% transaction I wanted to undertake I didn't do in the end because of the nagging question about my earnings. BTW they did automatically offer me a higher credit limit - which I accepted but I don't really want an enormous credit limit in case any card is compromised; heaven forbid.

midgesgalore

[Lootman]

Lloyds Bank have just written to me to say they are going to increase the credit limit on my credit card despite my only income being from drawdown and property rental.

I think I'll apply there first

Of the cards I have LLoyds gave me the highest credit limit. Also Halifax (part of the same banking group these days) also gave me a card and increased my limit without me asking for it.

HSBC are the stingiest with the limit (despite me being a "Premier" customer) followed by NatWest.

I am always asked for income, but never to prove it. I enter our household income since my wife still works.

[midgesgalore]

I think I'll apply there first

Of the cards I have LLoyds gave me the highest credit limit. Also Halifax (part of the same banking group these days) also gave me a card and increased my limit without me asking for it.

HSBC are the stingiest with the limit (despite me being a "Premier" customer) followed by NatWest.

I am always asked for income, but never to prove it. I enter our household income since my wife still works.

I have a few current accounts, one in the same LLoyds group. I think I'll review and perhaps apply for one of their cards if all is still acceptable.

midgesgalore

[DrFfybes]

I have a few current accounts, one in the same LLoyds group. I think I'll review and perhaps apply for one of their cards if all is still acceptable.

midgesgalore

I think Halifax still do their 'zero foreign currency transaction fee" card if you are looking - we don't use it often but handy for small purchases abroad, especially things like motorway tolls which are contactless.

Like fisher I don't recall ever having to prove income when applying for a credit card or bank account. You might have tp for a credit purchase agreement, but the only time I had one of those was for a Naim hifi in the 90s, which I still have

[midgesgalore]

I have a few current accounts, one in the same LLoyds group. I think I'll review and perhaps apply for one of their cards if all is still acceptable.

midgesgalore

I think Halifax still do their 'zero foreign currency transaction fee" card if you are looking - we don't use it often but handy for small purchases abroad, especially things like motorway tolls which are contactless.

Like fisher I don't recall ever having to prove income when applying for a credit card or bank account. You might have tp for a credit purchase agreement, but the only time I had one of those was for a Naim hifi in the 90s, which I still have

A timely shout DrFybes
I'm going to Canada for a good few weeks, later this year, and that sounds like a plan for foreign exchange without loading up with too much ca$h for food, tours and incidentals.

Thanks,
midgesgalore

[airbus330]

I have watched my credit rating with interest since stopping work and living off cash and ISA dividend income for the last 5 years. It has barely moved, but actually has gone up a bit. I have applied for a couple of cc over that period and had no issue.
Unfortunately I came a cropper with a mortgage. My 10yr Offset mortgage approached the end of term in January and since it suited me to have the money balancing the mortgage and occasionally using it as a cash float for buying big ticket items, I asked First Direct for an extension. Having gone through the interview hoops and even though I had on deposit at FD more cash than the mortgage amount, they refused to extend or renew as I couldn't show an income to repay the mortgage on a monthly basis. Most critically, they didn't accept share dividend Income into the calculation at all! (Or UFPLS drawdowns either). If it had been a year later when my State Pension kicked in and I'd be taking FAD from my pension (which would generate a p60) I'd have been fine. They admitted it was daft, but the computer said No and there was no wriggle room.

[Lootman]

My 10yr Offset mortgage approached the end of term in January and since it suited me to have the money balancing the mortgage and occasionally using it as a cash float for buying big ticket items, I asked First Direct for an extension. Having gone through the interview hoops and even though I had on deposit at FD more cash than the mortgage amount, they refused to extend or renew as I couldn't show an income to repay the mortgage on a monthly basis.

Most critically, they didn't accept share dividend Income into the calculation at all! (Or UFPLS drawdowns either). If it had been a year later when my State Pension kicked in and I'd be taking FAD from my pension (which would generate a p60) I'd have been fine. They admitted it was daft, but the computer said No and there was no wriggle room.

Don't be so sure about that. Shortly after passing my 65th birthday and drawing my SP, I asked about a mortgage for an investment opportunity I saw. I was told that my age alone made that very difficult, as the lender was not willing to extend a loan beyond a certain age, regardless of income.

The best they said they could do was a 5-year bank loan, at a much higher interest rate of course.

I declined to proceed with the venture.

[DrFfybes]

I have watched my credit rating with interest since stopping work and living off cash and ISA dividend income for the last 5 years. It has barely moved, but actually has gone up a bit. I have applied for a couple of cc over that period and had no issue.

Oddly mine seems to have increased as well. No mortgage any more, just a credit card paid off monthly. I set it up as protection from identity theft, now I'm wondering how high I can get it not that it means much apparently.

[Arborbridge]

My 10yr Offset mortgage approached the end of term in January and since it suited me to have the money balancing the mortgage and occasionally using it as a cash float for buying big ticket items, I asked First Direct for an extension. Having gone through the interview hoops and even though I had on deposit at FD more cash than the mortgage amount, they refused to extend or renew as I couldn't show an income to repay the mortgage on a monthly basis.

Most critically, they didn't accept share dividend Income into the calculation at all! (Or UFPLS drawdowns either). If it had been a year later when my State Pension kicked in and I'd be taking FAD from my pension (which would generate a p60) I'd have been fine. They admitted it was daft, but the computer said No and there was no wriggle room.

Don't be so sure about that. Shortly after passing my 65th birthday and drawing my SP, I asked about a mortgage for an investment opportunity I saw. I was told that my age alone made that very difficult, as the lender was not willing to extend a loan beyond a certain age, regardless of income.

The best they said they could do was a 5-year bank loan, at a much higher interest rate of course.

I declined to proceed with the venture.

The last time I tried to alter a mortgage to take advantage of a better offer, I was declined because my income is investment income. That doesn't count, but it's what I've been living off for ten years. Maybe it's different now, but this does seem over-cautious.

Arb.

[Lootman]

Don't be so sure about that. Shortly after passing my 65th birthday and drawing my SP, I asked about a mortgage for an investment opportunity I saw. I was told that my age alone made that very difficult, as the lender was not willing to extend a loan beyond a certain age, regardless of income.

The best they said they could do was a 5-year bank loan, at a much higher interest rate of course.

I declined to proceed with the venture.

The last time I tried to alter a mortgage to take advantage of a better offer, I was declined because my income is investment income. That doesn't count, but it's what I've been living off for ten years. Maybe it's different now, but this does seem over-cautious.

Arb.

Another thing that baffled me is that such lenders also ignore your capital and collateral. So in this case I sought to borrow only 50% of the property's value. And my ISA alone had the desired loan amount covered three times over.

But they ignored capital and collateral, ignored my investment income and focused only on my age. I am thankful that I have not had to deal with mortgage lenders since my late 40s.

[stevensfo]

I think I'll apply there first

Of the cards I have LLoyds gave me the highest credit limit. Also Halifax (part of the same banking group these days) also gave me a card and increased my limit without me asking for it.

HSBC are the stingiest with the limit (despite me being a "Premier" customer) followed by NatWest.

I am always asked for income, but never to prove it. I enter our household income since my wife still works.

Out of interest, is there a guaranteed way of getting your cc limit raised without asking for it?

I have plenty of debit cards, but my only UK cc is a Lloyds that I've had for at least 30 years and at the beginning, had a large limit. Many years ago after not using it -and forgetting all about it - the limit was reduced to only £1000. I rarely use it for more than £200, and that's just to keep it active, since I know that cards become dormant much faster these days.

If I use it for something just under the limit and pay it off, will it trigger an automatic increase?

Or is it better to spread it over a few months and show them that I'm a safe bet and can make them money.

Steve

PS I hate the idea of the latter. But the interest rate for one month wouldn't break the bank.