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Credit Awareness Week: It’s time to talk about ‘thin files’ – Experian

by: Steve Thomas, managing director of strategy, Experian UK&I
  • 13/03/2018
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Credit Awareness Week: It’s time to talk about ‘thin files’ – Experian
A lender’s decisions can only be as strong as the credit information available to them. For tens of millions across the UK, the process of applying for finance has only got more seamless.


But what about the people who lenders don’t have enough information on to make a decision?

About four million people in the UK have limited financial information available on them – perhaps because they have not opened a current account with a bank, held a credit card or even registered on the electoral roll. This is known as a ‘thin file’, which results in a lower credit score and limits the options available to access mainstream financial services.

What’s more, 1.2m people with thin files are in groups whose household disposable incomes are forecast to contract over the next few years. These people in the ‘squeezed middle’, who are working and earning but often struggle to make ends meet each month, would be among the most affected by an economic slowdown.


Contracting disposable incomes

The groups of people in this category are varied. There are 300,000 people starting out on their careers and in the early stages of building their credit profile, while there are also more than 200,000 people coming up to retirement who are well versed in making ends meet.

There are actions the industry can take to help their customers avoid financial exclusion, and access the right goods and services. Using newer and appropriate data sources is an important element in helping people who currently have thin file reports, so they can access a wider range of affordable finance options.

The Rental Exchange, for example, recognises rent payments on credit reports for the first time. Using this data means that, as things currently stand, 1.2m social housing tenants are in line to benefit with a better picture of their creditworthiness. We expect 83% to see a noticeable improvement to their scores as a result of this new data.


Open Banking will help

As another example, the launch of Open Bank APIs into the UK banking system, is also a landmark event – offering up additional, relevant data sources that can drive better decisions, wider financial access, more tailored products and a better customer experience.

The industry can help make things clearer for their prospects and customers. It is vital that all credit touch points help consumers understand how lending decisions are made and empower consumers to take control of their financial situation and make smart, sustainable choices, through affordable access to finance.

A major focus of Credit Awareness Week, which runs from March 12, is to encourage us as an industry to look at how we can create better outcomes for our customers. Affordable lending decisions, new data sources and new technology will all need to be part of the conversation. The financial futures of millions of people are linked to the industry getting it right.

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