Does Gambling Affect Your Credit Rating Or Ability To Get A Loan?

credit scoreFor many years you could gamble using a credit card in the UK. Although it was a simple process it did lead to some people falling into that abyss of gambling addiction. Due to this being the case, the decision was made by the Gambling Commission to ban credit cards from being used at online casinos, sports betting sites and so on. That ban began on April 14th 2020 and has remained in place ever since.

Credit ratings are something that have long been associated with the use of credit cards, for obvious reasons. Therefore, with these now being banned from being used at gambling platforms, along with other forms of credit, should it be of much concern as to whether your credit rating is affected anymore? There are other instances, however, where gambling transactions can affect your credit rating.  What about if you take out a loan or use an overdraft to fund your gambling pastime? Can this have an effect on any credit rating you may hold if you become overdrawn or don’t pay the loan back in good time?  How about gambling transactions in general that are visible on statements, etc., can these influence your ability to get loans and credit in the future?

This is what we will be looking at today. Whether participating in gambling can have an adverse effect on your credit rating or your ability to get credit. If so, what can be done so as not to fall victim to such? The short answer to the question is that your credit score will not actually be affected by gambling unless you have borrowed money to gamble with and not paid it back in time, the longer answer is sometimes gambling in itself can influence the decisions of lenders even if it hasn't affected your credit score directly.

The Official Gambling Commission Standing

credit card bannedGambling businesses are now not allowed to legally accept deposits in the United Kingdom through credit cards. This basically infers that players should not be allowed to place bets with money that they do not actually possess. Unless a player has borrowed money from a lender (or if they have entered into an overdraft via a debit card, for example), this could still have an effect on the credit rating in question.

Of course, while many of us would not use a loan for gambling purposes, that is not the case for everyone. And just because credit cards have now been banned at gambling sites, that does not mean you cannot fall into issues when using a debit card instead. After all, an overdraft that is not paid back will influence your credit rating.

What is more, if someone does take a loan out and borrow money to fund a gambling habit, the likelihood is that it is not so much a pastime and is more so a problem. A loan should only be taken out if you know for a fact that you will be able to pay it back and not suffer from any excessive APR rate in the process.  In fact, no finance provider will loan you money to gamble with in the first place so you would need to lie about your intentions if you did use loan money to gamble and where asked about the source of funds.  If a betting company suspects you are using borrowed money to gamble with they are obliged to refuse those funds.  Still, people do use loan money to gamble with especially unsecured loans, that come with less scrutiny.

One thing to remember about placing a bet online though, is that your actual activity with betting site is not reported to the Credit Reference Agencies of the UK. This is also true for information regarding any savings accounts, salary or benefits that you have. None of this is exposed to credit agencies. Of course, if you are preparing to apply for something that requires a closer look at your finances, such as a mortgage, then you will often be asked to provide evidence of your earnings and expenditure, including money you spend on leisure activities, such as gambling.  This may include statements and other documents and unfortunately some lenders will look negatively on gambling transactions even though they are completely legal, this is principally because gambling activities put you in a higher risk category for lenders.

How A Lender Views Gambling Transactions

checking paperworkAny credit report that is done on you will play a large part in your possibility of obtaining credit. This is especially true when it comes to looking at larger financial commitments, like a mortgage, for example. Of course, there are various considerations that come into play at this point. Affordability is the primary factor.

A lender of money will look at whether or not it is affordable for you to make necessary repayments on the loan you take out. It is at this point that all of your financial activity and commitments will need to be looked at by the lender. When it comes to products with small monthly outgoing payments, lenders will usually be satisfied with the information contained within a credit report. This reveals any of your current loans, with questions backing up other regular outgoings of money.

Of course, a mortgage or something of equal value is not something that can be considered a small loan of money. Lenders would want to be a lot more certain that their level of risk is agreeable to them. This means no nasty surprises within your personal finances, and in this respect, it is not uncommon for borrowers to have to provide details of the previous 3-6 months of outgoing payments. Bank statements, payslips and other paperwork will need to be seen, so that the loan company can analyse such and determine whether or not you are a risky customer.

While regular outgoing payments like childcare, pensions, existing borrowings and such will be taken into account, gambling transactions are not quite so easy. These will definitely be subject to further questioning when it comes to taking out a loan. Of course, decision makers cannot scrutinise you over the odd sports bet or a couple of small deposits at an online casino. However, in the United Kingdom, about one in five of us gambles on a weekly basis. That is why lenders will carefully analyse the financial information of each person applying for such. In the end, the level of spending is what will be thoroughly studied, and this will be looked at in comparison to your weekly or monthly income.

Obviously, it is better if you do not specifically have gambling transactions on display on your bank statement when applying for such loans. They are not specifically looked upon so favourably by lenders on the whole.

There are some options that can allow you to reduce gambling transactions on statements.  One of these is to use an intermediary eWallet to deposit and withdraw to betting companies (e.g. PayPal).  This way gambling transactions themselves do not show on bank statements, only transactions to the eWallet.  Even in this case, however, a lender could ask for a copy of your eWallet transactions.  Other options include using cash vouchers such as PaySafeCard, although again even if you make cash transactions you could be asked to explain them.

Why Is Gambling A Negative Signal?

loan agreement

A credit score is simply a measure of risk, for a lender a higher score means the customer is a deemed lower risk when it comes to defaulting on debt.  Even if your credit score is not affected by gambling if you are borrowing large amounts and you have a lot of gambling history it can still affect your credit rating with the lender.  Even if your credit score is high the fact you gamble can mean you are still put into a higher risk category, especially if you gamble with a good proportion of your disposable income. 

Gambling transactions showing on your bank statement would be cause for lenders to get very nervous, especially if they are appearing frequently and/or for large amounts. When coupled with other factors, there is quite the potential for an application for a larger loan to be rejected due to a bad credit score.

Of course, again, you must look at whether you are betting once every so often, or if it is something that you engage in on a daily or weekly basis. A lender is unlikely to care whether you place a random sports bet or deposit £30 at a casino site once a month. That’s not likely to set any alarm bells off ringing. Of course, if you have a history of late payments in general and you are found to be depositing large amounts at online gambling sites on a frequent basis, that is quite the different circumstance. Lenders will not want to engage in allowing you to borrow cash if they consider that some of it will be going to gambling platforms.

A lender does not want to lose money, and therefore, they will manage their risk to the best of their capabilities. If you are looked upon as being a customer at a high-risk level due to gambling activities, then your credit rating is likely to be affected as a result. Someone who saves money frequently enough and has funds to back up their repayments is going to be of much more appeal to a lender than someone who regularly transacts with an online gambling site.

One thing to be sure that you do not do is borrow money and then utilise such funds on a betting website. If you have entered into a debit card overdraft, again, do not use that money for betting purposes. After all, this all goes against you and your credit score. Any debt, be that an overdraft, late loan repayment, credit card bill payments and so on, works against you. This means that it is possible for gambling to affect your credit score.

How Much Can You Gamble Without Affecting Credit?

money under magnifying glassThere is no absolute value that will trigger alarm bells with lenders, what is matters is the affordability of your gambling.  If you are gambling £1000 a month but you are earning a quarter of a million pounds a year then a lender will see this amount as affordable, if however you are earning £30,000 a year and gambling £1000 a month then of course this is not going to be seen as affordable.

Lenders are not stupid and they know all sorts of people gamble and that gambling in itself is legal and simply a form of entertainment for many.  What a lender will expect you to do is only gamble with your disposable income and even then they are going to expect it to be a fairly small proportion of that income.  If you have disposable income of £500 a month and deposit £50 to gamble with this is going to be fine, if that percentage starts to creep above 20% then you may start running into issues.  If you are gambling 50-100% of your disposable income there will certainly be questions raised.

Betting companies are obliged as a condition of their UK gambling licenses to check the source of funds, partly to prevent crime and partly to ensure customers do not lose money they cannot afford.  These companies are supposed to stop you from gambling this money if it represents a high proportion of your income, if the money is borrowed or if you are using other sources of funds (e.g. redundancy payouts, pension pots, etc.).  Therefore, protections are in place to help people stay within their own gambling limits, of course this doesn't always work and there are instances where a history of gambling can affect your future ability to get credit.

What Can You Do to Retain a Good Credit Score?

credit checkWhen it comes to gambling, it is always recommended that you never deposit more at an online site than you can afford to lose. Be sure that everything else is purchased, paid off and so on before you consider adding money to a casino, sportsbook or whatever. Of course, if you then have £100 left at the end, split this in half. Save half and then deposit the other to an online gambling site, if you know you can get some entertainment out of it and you will not miss it if you lose it all.

What is more; use that deposited money wisely, too. Do not blow it all on a single wager, as you are then likely to want to deposit more, and there goes the other £50 leftover. That can start a steep decline into the gambling addiction pit, which is something that nobody wants to go down. Just be smart about your finances. As long as your bills and loans are paid off on time, then a lender is not likely to decline you a loan in the future. It is you who is in control of how your credit rating looks, so you only have yourself to blame if that score is affected by your gambling.

As noted, lenders are not going to be picking out the odd flutter here and there. They will, however, note discrepancies that occur on a more regular basis than they should be – especially if your incoming funds are less than your outgoing money. That is when you are in trouble. And if you are using gambling for the outgoing funds, your credit rating is likely to suffer drastically.