By | More than five million people in the UK have a financial history so thin that the agencies which collate credit scores regard them as “invisible”, according to a study from Experian. Without a credit history, this unnoticed multitude is locked out of the financial system and therefore unable to access loans or mortgages and forced to pay more for phone contracts or utility bills. Food writer Jack Monroe is one of the most famous of these invisible people. Unable to get an overdraft or other basic credit products, she was forced to sell everything she owned to pay the bills. But the situation is changing. To improve financial inclusion, credit reference agencies can now – thanks to open banking – gather “alternative credit data” which makes it easier for people to build a financial record that validates their identity and proves they are creditworthy. Open Banking connects banks, third-parties and technical providers, allowing them to share data with fintech companies and other financial institutions which provide innovative new services to benefit consumers. One of the most straightforward new ways for people to build up a credit score is a simple technique called Rent Recognition. If you’ve been paying rent to a landlord, then you already have proof that you can be trusted to make regular payments on time and are therefore creditworthy. In 2016, Experian pioneered the observation of rental data in partnership with Big Issue Invest, the social investment arm of The Big Issue Group. This world-famous group also runs a financial services organisation called The Big Exchange. Powered by Moneyhub, an Open Finance data, intelligence and payments platform, it allows rental data to be shared with credit agencies. Anyone living in rented accommodation can also ask their landlord to submit data or it can be filed manually. Moneyhub has just launched its own Rent Recognition feature, making it unprecedentedly easy to send anonymised details of rent payments to credit reference agencies such as Experian. Dan Scholey, chief operating officer of Moneyhub, said: “People who are regarded as ‘invisible’ to credit reference agencies suffer in many ways. They are often unable to take loans or mortgages which allow them to move forward in life, meaning they are forced to remain in rented accommodation. “But the secret to progress can be found in the very transactions which allow them to stay in a rented home. “I strongly believe credit scores need to be replaced with fairer and more accurate affordability checks, but it is going to take some time for the industry to wean itself off the old systems. In the meantime, it is important for consumers to keep their score as healthy as possible. “Experian will also accept details of regular rental payments and incorporate them into people’s credit scores through a service called Experian Boost. Moneyhub decided to go one step further when we offered a similar ability in our platform. We only share the minimum level of data to meet Experian’s requirements and don’t hand out details of other transactions, reducing the risk that people will end up being bombarded with unsolicited credit marketing. “Financial inclusion is one of the great issues of our time and we’re delighted to see the industry setting out solutions which enable people to benefit from the products and services which were once unavailable to them.” Improving access to credit is a key way of boosting financial inclusion. Fairly-priced and well-managed credit can also help to alleviate the worst effects of poverty. More than 12 million UK residents are unable to pay an unexpected bill of £300, Deloitte revealed this year. Without access to affordable, mainstream lending services, these vulnerable people may have to turn to sources of credit that are expensive and can worsen their financial situation. Traditionally, the data used to generate credit scores is provided by banks, building societies, utility companies and other organisations, and typically based on events like missing a credit card payment. But alternative credit data is starting to supplement this information. Rent payments are one of the pieces of data which can improve people’s credit rating, but utility bills and information contained on public records can also be used to prove creditworthiness and tackle the problem of financial invisibility. Dan Scholey added: “It is a scandal that so many millions of people in the UK are invisible to credit agencies. We all experience emergencies or unexpected situations that we can’t afford, but shouldn’t have to sell all our possessions to deal with these crises or, worse, turn to other expensive forms of borrowing to get money to cope with an emergency. “That’s why the rise of alternative credit data is such a big deal. If you pay your rent on time, you can probably be trusted to pay a credit card bill, maintain an overdraft or keep up payments on a mortgage. “Submitting details of rental payments to credit reference agencies is a great way to build up a credit score and unlock the many advantages of modern financial services.” Users of Moneyhub can share details of their rent quickly and easily from right inside the app, whilst partners that have enabled the feature can offer the same abilities to users of their own apps. Screenshots of the process can be found attached to this email. Users’ income and expenditure is not shared with credit agencies if they choose to enable Rent Recognition. Credit reference agencies do not have a full picture of someone’s financial situation and so are heavily reliant on “negative events” like missing credit card or overdraft payments, meaning it is important for everyone to stay on top of the transactions taking place in all of their accounts. As part of its financial inclusion mission, Moneyhub has pioneered a range of services. It will notify people of upcoming transactions that will make them overdrawn, before moving money from another account to cover the shortfall. This helps people keep on the right track and prevents their credit score from slipping further. — ENDS — |
| Open Banking Excellence (OBE)Becci Furnell, Global Press Officebecci@openbankingexcellence.org pr@openbankingexcellence.org |
| MoneyhubDan Scholey COObecci@openbankingexcellence.org pr@openbankingexcellence.org |
| About MoneyhubMoneyhub is the leading Open Banking and Open Finance platform that uses the power of data, intelligence and payments to enhance the lifetime financial wellness of people, their communities and their businesses. Moneyhub’s APIs and white label solutions help businesses – both within and outside of financial services – drive customer engagement through hyper-personalised experiences. The company takes consumer data security seriously and has been instrumental in the roll-out of Open Banking from its beginning. Leading the way in Open Finance since 2014, Moneyhub is authorised as AISP and PISP by the FCA, ISO-27001 certified, co-founder of FDTA and works on the Pension Dashboard and TISA Open Savings, Investment and Pension steering committees to put the power of data into the hands of those who own it: the consumer.For more details, please visit https://www.moneyhubenterprise.com/ |