Credit Underwriting In The UK Needs A Re-Think
Wednesday, 10. August 2011
The credit system in the UK is in need of a really good shake up. Credit decisions seem to be made based on some very iffy information and totally illogical. Take two people doing similar jobs, earning the same amount of money who both apply for credit on similar cars. The first client has a perfect, unblemished record. He has a mortgage and a couple of credit cards all of which are paid bang on time. The second client is exactly the same but 2 years ago he was made redundant. As a result he defaulted on his mortgage and went into two months arrears on his credit cards.
This all happened over 2 months. He then got another job and within 3 months had brought his mortgage payments fully up to date along with his credit cards. Since then he has had perfect credit.
However, the first applicant gets his loan approved whilst the second is declined. Why? Because he has adverse appearing on his credit file. But how does a lender know what would happen if the first applicant was made redundant?
How would he handle it? Would he bring all his payments back up to date within 3 months as the second applicant did when he was made redundant? I feel it is so wrong to penalise a credit applicant if he has had a problem then done everything possible to successfully bring his credit back in line.
If anything the second applicant is a better risk as he has shown that he is capable of managing his debt but that’s not the way the system works, it’s all wrong. I will continue to pressure lenders to change the system. By Graham Hill
