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The return of Credit Awareness Week

Credit Awareness Week returns for its second year on March 12 and is once again led in partnership by Credit Strategy and Experian. Kamala Panday explains how two research projects, focussed on thin credit files and credit reporting, are moving the campaign to the next stage.

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Aimed at encouraging consumers to gain more control over their finances, two major pieces of research will be unveiled as well as our new, improved Pathfinder tool which is a guide to what people can do if they are refused credit. Credit Strategy founder, Kamala Panday, reviews what’s happening and how you can get involved.

 

What’s the biggest thing you will ever buy in your life that you’ll never know you bought let alone how much you paid for? That’s right – credit.

 

OK, if you’re super wealthy then that’s less likely to be true – you may have so much money you don’t need credit. But for everyone else, the cost of credit can be significant. It’s not unusual for the amount you pay for credit over the lifetime of a mortgage to exceed the original value of the house. What’s more, the total cost of credit in your lifetime will remain a mystery to you.

 

It’s scary, but not surprising. Credit is rarely viewed as a product in its own right, but simply the mechanism to help us buy the product we really want to get – be it a house, car or item we want from our favourite retailer. And therein lies the problem.

 

Our lack of understanding of how credit works and what we need to do to ensure we maximize our credit scores so we can get the most competitively priced deals for our future credit needs – means we inevitably end up paying more than we need to in the long run.

 

We shouldn’t be too hard on ourselves. Lenders haven’t always made things consumer friendly in the maze of terminology that litters the world of lenders – from peer to peer finance, high-cost, short-term credit or the difference between personal contract purchase and personal contract hire when buying a car. And how about the mysteriously named logbook loans for those that want a loan that will be secured against their car?

 

To navigate the maze, we have to invest time just to understand the landscape we’re dealing with. Add to the mix that the very measure of the cost of credit – APR – that annual percentage rate, not April as some people in our early polls thought – is only understood by a very rarefied world of the smartest of people in the world of credit risk and you can see why many of us just get stumped.

 

Albert Einstein is supposed to have said that compound interest – the basis of APR – was the eighth wonder of the world. Or the greatest mathematical formula of all. Or something to that effect. QED.

 

Here at Credit Strategy we’re delighted to have teamed up with Experian for the second year to help redress the knowledge gap through our Credit Awareness Week campaign. The Week aims to empower consumers to improve their financial futures and is being held between 12 and 16 March 2018.

 

What are we doing?


We’re trying to help people become more aware about how lenders assess your credit worthiness – what’s important and what isn’t.

 

On our site you will find a guide that provides simple steps to help people understand their credit score and take simple steps, to improve it. We also want to debunk the myths we uncovered in a survey of consumers about credit scores and how decisions are made by lenders over whether to accept applications for mortgages, loans and credit cards. The guide is designed to help consumers help themselves.

 

Ultimately, we’re trying to help you get the best possible deal, when you apply for a loan, mortgage or credit card.

 

Thin files by parliamentary constituency

 

Two pieces of research will be revealed during the Week. The first is a large piece of research of the financial health of UK consumers focusing particularly on the segment of the population by region that find it difficult to get good financial deals because their credit files are too thin. Thin files can hinder your chances of being approved for a mortgage, a loan, or any other purchase that involves obtaining credit.

 

A thin file means that there is too little data available about you. ‘Thin file syndrome’ can affect people who have not made many credit applications in the past decade, those between 18 and 20 who have not yet built a credit history, or anyone who has just arrived in the UK or is returning after living abroad. Those over 60 are also more likely to have thinner files, because they own their assets outright and no longer use credit, while the wealthy may rarely use credit.

 

Look out for our interactive map of the Great Britain highlighting the parliamentary constituencies where there are particular concentrations of consumers with thin files. The results are an eye opener.

 

We are holding a Parliamentary Reception on Tuesday 13 March which has a support of a range of MPs from all the All Party Parliamentary Groups and speakers that relate to the credit and financial services sectors.

 

Credit report checking by region

 

Ahead of Credit Awareness Week, we will also be revealing through a separate YouGov poll, commissioned exclusively for Credit Awareness Week, a list of areas where people are most likely to have checked their credit report in the last 12 months.

 

Experian’s research shows the degree to which people are taking control of their finances by shopping around and switching to cheaper deals to help make their money go further. Credit awareness helps people stay in control of their spending and borrowing, and to manage their money successfully.

 

Encouragingly, results compared to the YouGov poll we also conducted last year for Credit Awareness Week show public awareness of a number of credit-related issues has increased year-on-year. However, engagement remains relatively low, despite the availability of free credit score services.

 

But there is still quite a bit of misunderstanding about credit reports, scores and decisions. For example, 39% of those surveyed wrongly believe their own credit report can be affected by a previous resident of their address. And 14% incorrectly believe that checking their own credit report damages their credit rating.


Pathfinder – your tool if you are refused credit

 

During Credit Awareness Week, we are also providing consumers with a toolkit called Pathfinder that takes them through simple steps for what to do next, when their application for a loan, mortgage or credit card has been refused.

 

Behind the scenes we are working to convince lenders to give consumers better, clearer information, when they refuse a consumer’s application for a mortgage, loan or credit card. If you are a lender or third party supplier connecting with consumers, we encourage you to place this tool on your website to help your customers navigate this confusing terrain in the credit decisioning process.

 

We look forward to working further with the industry to enable consumers to increase their understanding of all things credit. Do get in touch if your firm could help with any of the aims of the week or promote the Credit Awareness Week site badge through your own press and marketing channels.

 

KPanday@shardmediagroup.com

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