There was a time when customer due diligence, or know your customer (KYC) in old money, was as simple as meeting your client & collecting documents to prove their identity & current abode.
For underwriting purposes this might be combined with collecting proof of income, and maybe some evidence of the deposit available, but for many that was as far as the exercise went.
However now more than ever, it is evident that these checks are only part of the activity of really knowing your client, and indeed the client knowing themselves (more on that later). To really understand a client’s circumstances, every adviser needs to access their client’s credit file.
Credit files are an incredibly valuable tool and can really give confidence that you know the client and have completed reasonable due diligence checks before placing that mortgage application.
The internet has of course made accessing such data easier than ever before and it is no longer necessary to wait for a paper file to be sent through in the post containing client financial data.
Through the internet, this is available immediately and cheaply – indeed a statutory credit report only costs £2, with at least one well known supplier, such as Noddle, making such reports available free of charge.
This means that your client can easily access a copy report by way of preparation for that all important fact-finding meeting.
And that report will be able to give you confidence and will allow you to confirm items such as credit commitments, monthly payments, and payment history, not to mention details of any bankruptcies or County Court Judgements.
Although not infallible, it may also help you ascertain the client’s address history and indeed any associated financial links with those addresses. Increasingly lenders expect you to know about these.
There are many more advantages to reviewing the credit file with your client.
Some agencies will, for example, give an indicative credit rating, providing you with an instant picture of the client’s financial position. To assess this further, look at the itemised credit card, loan and mortgage lender details and check how the customer runs their accounts.
Review the search history and establish who has been looking at the client’s financial position. This will also tell you what the customer may have been thinking of purchasing – for example home insurance, and may provide you with a sales opportunity.
You may also be able to uncover details of individuals with whom the client has a financial connection (e.g. joint mortgage). It is also useful to be able to confirm whether they are shown on the electoral role, something the report can help you with.
Finally, all too often clients are not entirely clear of their own financial position, and reviewing the credit file with them may well lead to other useful discussions. This is also an area where you can add value over any non-advised internet service. Reviewing a credit file regularly can assist in spotting fraudulent activity, especially identity fraud.
Regular reviews have to be considered as good practice, but like so many good practices, how many of us do it? Bring the subject of a credit file review to your client’s attention and everyone is a winner.
