David Jones is director of Click2Check
When I read recent research that suggested four million people in the UK checked their credit score for the first time during the COVID-19 lockdown, my first reaction was, “Is that all?”
Indeed, given the seriousness of the economic situation being faced by individuals as well as the country as a whole, I can fully understand why vast numbers might be looking at their credit record and wondering how their future is likely to be tied up with the credit ranking they currently have.
My other concern around this was not just how many Brits were now accessing their credit report for the first time, but how many might actually fully understand the report, their score, status and how it ultimately impacts on their financial life?
Because, I think that most advisers would agree, there is often a real disconnect in that department leaving many individuals completely unaware that their ability to secure the credit they want and need, could be severely compromised by what their credit report says.
Especially in an environment where we are only just starting to see the full impact COVID-19 is likely to have on individuals and the economy.
As I write this, the latest employment statistics for May-July revealed the biggest fall – 220,000 – in over 10 years. Plus, while the Bank of England suggested the COVID-19 hit to the economy may not currently be as bad as initially feared, as we all know there are few certainties at this time.
The better news with regard to credit score engagement is that the same research suggested the first look at a credit report has helped initiated action on many individual’s part – 41% said they’d set a new budget, 19% said they’d opened a savings account while 16% said they were now looking for cheaper insurance.
However, the numbers not taking any action perhaps tells us more about the greater understanding of credit, how this appears on the report, and what, for example, lenders and providers take into account when determining the credit-worthiness of an individual.
It is no wonder that advisers are, more often than not, presented with a very mixed picture by clients when it comes to detailing their own perception of their credit report. Ask a client to describe their own view of their credit situation and you are likely to be met with blank looks or indeed blank gaps and details on just what the existing situation is.
There has perhaps therefore never been a better time for advisers to have the clearest of pictures upfront on a client’s credit report and bank statements, in order that they are working from a single source of truth that will allow them to provide best advice from the outset based on full information, not a patchwork quilt of perceived data.
If there is a positive here, it’s in terms of the level of client engagement with their own financial situation – it is clearly not great that it has taken a pandemic to get us to this place, but perhaps better late than never, especially if advisers are seeing clients whose financial futures are less than certain.
Many individuals will be in such a situation, and in that sense a changeable picture might be presented, but with client agreement on accessing the credit report/bank details through a product such as Credit Assess, at least the adviser is in full possession of all the facts, not just the client’s (potentially skewed) interpretation of them.
Ideally, we would want everyone engaged with their credit report and understanding what it means for their borrowing situation, but that seems like wishful thinking. At best we therefore want a fully-informed adviser profession who can do so much more with the very clearest information.