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Campaign for clarity on credit refusals gains momentum

Lenders and advice bodies have both admitted that the industry needs to provide clearer information to consumers on credit scoring – particularly when they are refused credit.

Amber-Ainsley   Pritchard

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Amber-Ainsley   Pritchard
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At conferences including the Credit Summit last week, during Credit Strategy’s inaugural Credit Week, lenders and advice bodies discussed the need for lenders and the industry generally, to do more to help consumers understand the credit scoring process.


Crucially, they debated how lenders could provide more precise reasons to people on why they are refused credit, when consumers’ applications for mortgages, loans or credit cards are refused.


The topic was discussed at length at the Credit Summit as Credit Strategy officially launched its Credit Awareness Week campaign, run in association with Experian.


The campaign, designed to increase consumers’ awareness and understanding of credit scoring, is encouraging lenders to provide clearer information to consumers in their exchanges on applications for credit.


As part of the initiative Credit Strategy and Experian have created a portal – Creditawarenessweek.com – that shows consumers how to improve their scores and with an interactive tool, tells them what steps to take after being refused credit.


“It’s a tricky one, because you don’t want to give away why you’ve made the risk-based lending decision, and the credit-worthiness assessment"


Speaking on a panel at the Credit Summit, Andrena Saripo, head of retail credit at Clydesdale & Yorkshire Banking Group, was asked how lenders could tell consumers they’ve been declined an application without giving away all the information about their decisioning.


She said: “It’s a tricky one, because you don’t want to give away why you’ve made the risk-based lending decision, and the credit-worthiness assessment. It comes back to the affordability piece and how lenders can be more transparent around that issue. We’re pointing consumers to the credit reference agencies when actually, the issue could be that the consumer hasn’t been able to prove affordability. That’s somewhere where we could do better.”


Confusion reigns


As part of the Credit Awareness Week campaign, a YouGov survey was conducted to establish how much confusion exists among consumers on the credit scoring process.


It showed that 86 percent of consumers believe they should be offered clearer explanations when lenders decline applications.


Speaking at a separate Credit Summit debate, which focussed specifically on the Credit Awareness Week campaign, Georgina Hardy, senior partnerships manager at Experian, said: “This result of 86 percent is an overwhelming number. We need to be better at an industry level at explaining what some of these reasons might be. When consumers are applying for a financial product, it can be an emotional process for them.”


On the same panel, Craig Simmons, debt advice sector manager at the Money Advice Service, said: “There’s absolutely no doubt whatsoever about the level of confusion among consumers. Some of the pages on credit scoring on the Money Advice Service website are some of the most visited.”


Before the Credit Summit debate, the Financial Conduct Authority’s (FCA’s) chief executive Andrew Bailey told Credit Strategy, in an exclusive interview, that consumers deserved more transparency from lenders on credit refusals.


He said: “It’s wrong to think the only thing that matters is the credit score. I think it’s likely, inevitable and sensible that the credit scoring process becomes more transparent to people. I think people deserve greater transparency.”


The BBC has shown interest in this campaign and will be airing a discussion on BBC Radio Ulster this Saturday.


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