Paul Hunt is head of marketing at Platform
A lot has been made of the footprints left on clients’ files when offering online decisions and the confusion that exists in the type of searches conducted by lenders, the timing of those searches and the impact it has on an individuals overall credit rating.
However from research Platform has conducted with its brokers, there is a very clear desire from the broking community to get binding decisions, even if it means leaving a hard footprint on a client’s file. Indeed in assessing the views of somewhere in the region of 400 brokers via Platform’s ‘clickthinking’ facility available on our website, we found 75 per cent of them opting for a decision when asked: “If a hard footprint on an applicant's credit record enables a binding decision upfront and a soft footprint only provides a decision in principle, which do you prefer?”
Clearly brokers are not in the habit of making life difficult for their clients or trying to create problems for them when seeking credit in the future. What we have to consider is why brokers want a binding decision, even if it leaves a hard footprint on a client’s record. In the non-conforming market there are a number of reasons that binding decisions are so important.
In many cases in this market, clients do not even know if they will be eligible to take out a mortgage. For clients who are this uncertain given their circumstances, it is a very powerful tool for brokers and lenders alike to be able to confirm there and then that credit is available.
In our electronic environment, time delays are being eradicated and instant decisions are the norm. Clients want to know immediately and for definite if they are eligible for credit and those lenders unable to give such decisions will increasingly lose out to those that can. Gone are the days when brokers would have to fax to a lender a decision-in principle (DIP) form, only to be told that it would take four hours to turnaround and even then it would only be ‘in principle’.
To give a binding decision it is important for the lender to be able to access the credit information it needs to be certain and this requires a hard footprint to be left on an individual’s record. Lenders need to get the right level of Credit Account Information Sharing (CAIS) data if they are going to be able to effectively issue binding decisions. In the sub prime market, many borrowers do not have an accurate picture of their own credit history.
Some borrowers will believe they have, for example, £1,000 worth of CCJs against them and two months worth of arrears. In checking this, it is often the case that there are actually more and sometimes less CCJs and/or arrears against the potential client than they thought. Their situation may have changed since they last reviewed their details or they may have been unaware of rulings or arrears that have been marked against them.
To ensure borrowers get the right product it is therefore essential that lenders get as much information as possible, allowing the correct product to be chosen. This is not such a big problem in the mainstream market where clients know they have no adverse credit recorded against them. They are simply looking to see how much they can borrow and at what rate and so it is not always necessary to delve as deep when sourcing the products that are open to them.
The bottom line is that lenders are looking, where possible, to provide finance for genuine customers rather than looking for reasons to bar them from credit. By working closely with brokers and clients it should be possible to ensure that genuine applicants do not slip through the net and get caught up in situations which could be resolved through clear communication.
If lenders are going to be able to give quick and binding decisions then they also need to access the right level of information and it is only fair that these searches are recorded to prevent problems with those that might seek to abuse the system.
However this does not mean that borrowers are or should be excluded as a matter of course where they have had their file genuinely searched on numerous occasions. Certainly in Platform’s case we know that borrowers requiring specialist lending products may have a number of footprints on their record, for example those borrowers who have buy to let portfolios, and understanding the reasons behind this has to be part of the process for every lender in the market.
Yes we work in an electronic age, but we have not left behind the ability to accommodate individual circumstances when they arise.
