63% of consumers say they are willing to see other financial data used in credit decision making

11th June 2010

For many people the threat of redundancy or a reduction in pay remains a serious concern, for others there are some signs of improvement from the economic instability caused the recession.

However, during the past couple of years many people may have fallen behind with some credit payments and even though these people are now in a stronger position, this could have a negative impact on their long term access to borrowing.

According to credit rating agency, Equifax, the consequence could be greater financial exclusion problems in the future if the issue is not addressed.

Neil Munroe, External Affairs Director, Equifax believes there is a strong argument for including other forms of data in an individuals credit file.

"Clearly job losses and pay freezes are likely to have resulted in more individuals finding themselves facing financial difficulties in the last couple of years, which will then be reflected on their credit file" he explained "However, it is also likely that many of them will have addressed these difficulties relatively quickly and therefore be reasonably good risks for lenders in the future.

"But if credit files continue to only include the payment performance data currently held and lenders rely on this for their risk assessment, many individuals who may have missed the odd payment in an otherwise good credit record stand more of a chance of being declined. That's why we believe that there is an argument for other sources of data to become part of the credit decisioning process. Indeed, it appears that consumers are already thinking along these lines and are open to other types of data being used as part of credit applications."

In a recent survey commissioned by Equifax, 63% of consumers who had purchased a copy of their £2 statutory credit report said that they would be happy for other forms of data to be included on their credit file including data on utility and rent payments.

Income data provides an additional insight into an individuals ability to repay and is something which could also be included.

"These new data sources, which could be supplied after taking into consideration data privacy rights, could contribute to calculations on indebtedness, enabling lenders to make the most responsible lending decisions. But, as importantly, they could ensure that a culture of financial exclusion does not evolve in the next few years", continued Neil Munroe.

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