Our credit rating methodology has been developed according to the principle of three Cs: Capacity, Character and Collateral. This approach is commonly used in mortgage underwriting to assess risk. The following table displays the three Cs and the variables we consider when assessing a borrower.
| Definition | Key variable | Weight | |
|---|---|---|---|
| Capacity (affordability test) |
(affordability test) The amount that a borrower can carry, i.e. total monthly expenses (payment on current debt/s, housing payments, credit cards payments, car payments etc.) divided by total monthly income (salary, self- employment, net rental income) minus The aim is to estimate the total debt service ratio (TDSR) prior and after debt (for which the loan is sought). | TDSR | 25% |
| Character | Based on credit report variables: past credit history, time at present address etc. and time at employment. | Credit report | 60% |
| Collateral | Loan to value ratio of the property to which financing is sought. Value is estimated by an independent valuer. | LTV | 15% |
Character is the most important variable when we assess a borrower, based on a borrower’s credit report which we obtain from a credit referencing agency. It is followed by Capacity, which is an assessment of a borrower’s ability to afford a loan. We also assess the security provided by a borrower, Collateral.
After each of the Cs has been assessed, we assign a rating based on a 5 point rating scale, where 5 is the best and 1 worst.
| TDSR | Rating |
|---|---|
| Up to 39% | 5 |
| 40-49% | 4 |
| 50-59% | 3 |
| 60-69% | 2 |
| 70% and higher | 1 |
| Credit report score | Rating |
|---|---|
| 5 | 5 |
| 4 | 4 |
| 3 | 3 |
| 2 | 2 |
| 1 | 1 |
| Collateral - LTV | Rating |
|---|---|
| Up to 55% | 5 |
| 56-60% | 4 |
| 61-65% | 3 |
| 66-70% | 2 |
| 71% and higher | 1 |
| Credit score | Definition | Segment | Credit rating |
|---|---|---|---|
| 5 | Very good | Super prime | A |
| 4.1-4.9 | Good | Prime | B |
| 3.1-3.9 | Fairly good | Near Prime | C |
| 2.1-2.9 | Poor | Sub Prime | D |
| Up to 2.0 | Very Bad | Sub Prime | E |
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LandlordInvest Limited is authorised and regulated by the Financial Conduct Authority (FCA) (FRN 660926). LandlordInvest Limited is not covered by the Financial Services Compensation Scheme (FSCS).
Loans provided to borrowers through LandlordInvest are provided solely for business purposes. Loans are therefore not regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974. You should seek independent legal advice if you are in any doubt as to the consequences of the loan not being a regulated agreement under those Acts.
LandlordInvest Limited (Company No. 09245725), registered office 330 High Holborn, London, WC2A 1HL
