Lenders may be able to flag up struggling borrowers more easily
January 27, 2008
Bad debt levels in the UK have caused huge problems for lenders and finance companies over recent years, and lenders have been increasing stringency and looking for new and inventive ways to not only recoup the losses from these bad debts but also to avoid taking too high a risk when it comes to offering finance. In the past this has proven difficult for many lenders, and they have fallen victim to bad debt despite running credit checks and credit scoring on potential borrowers.
However, a recent report has shown a new way in which lenders may be able to identify those at risk of struggling with their finances, enabling them to pick up on potential borrowers that may end up becoming bad debtors. For those that are looking to borrow money this facility could result in pre-emptive reductions in the amount that they are able to borrow if the lender sees them as being at increased risk of missing repayments in the future. For those that already have finance the lender could ask that the loan be repaid early in order to reduce the chances of the debt being unpaid in the future.
The service is to be provided by the credit reference agency Experian, and when lenders run a check it will flag up when the customer has missed two payments or if they have exceeded borrowing limits. Another area that will be brought to the lenders’ attention is if the consumer has made a high number of applications for finance in a short period of time, which could be another indicator that the consumer is struggling financially. These risk alerts will be made available to lenders on a daily basis, so that they can then take the appropriate action whilst there is still time.
According to Experian officials it is not just the lenders that will benefit from the risk alerts service, as it will also help to ensure that consumers are not given finance that they cannot afford and will struggle with in the near future.
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