Credit card providers use a whole host of information about borrowers to decide whether they are an acceptable risk. They no longer just focus on past behaviour but use specialist information to assess what customers are likely to do in the future.
Callcredit, a reference agency, says that while historically it has been fairly easy for lenders to see how borrowers have dealt with previous debt, they have had little information about income and spending patterns.
Now, thanks to the wealth of information obtained by credit reference agencies, lenders can take a more holistic view.
Neil Munroe at Equifax, a credit agency, says lenders have access to more data than borrowers might realise.
“Maybe people are not aware that missing a mobile phone or mail order payment could affect their credit record,” he says.
Lenders now have access to detailed transactional data – what you buy, where you buy it and how you pay for
it – alongside how you service other accounts.
Callcredit monitors borrowers daily on behalf of at least 10 credit card providers, including HBOS. It looks for signs that a borrower is getting into financial difficulty and will feed any information that could affect their credit rating back to their lender. This could be a few missed payments, or evidence that they were applying for a lot more credit. The group also has an “over-indebtedness” index, which provides a batch of information about an individual’s income and outgoings. Callcredit compiles this from data other companies provide and information borrowers provide themselves, such as details on salary and expenditure, on application forms for other loans or bank accounts.
“It’s all about being on the case if someone begins to experience problems,” says Mel Mitchley, director of industry relationships at Callcredit.
Signals that could lead lenders to reduce credit limits include:
●missing a payment on a mortgage, loan or another credit card, or even a mobile phone, mail order account or student loan.
●having multiple cards with a large combined credit limit.
●drawing closer to your credit limit each month, while just paying the minimum payment.
●missing a payment date, even by a few days.
●applying for additional credit, especially if the lender believes you are doing this to reduce or juggle other debt.
