Getting the message out there
David Jones is director of Click2Check
While there has been a growing education piece around credit scores, what they mean, what they could mean for those seeking finance, and just how they can be improved with just a few simple changes, there is still a concerning lack of knowledge particularly from certain client demographics.
I’m not sure how many 16-24 year old clients you currently have – I’m going to guess at not that many – but when it comes to the younger age groups there is definitely a need to ramp up the educational message around credit scores and what it could potentially mean for them.
Recent research from Compare the Market revealed that nearly nine out of 10 had no idea what a credit score is or what it’s used for, and nearly half were unaware that they are used when determining whether they can secure a mortgage. The knowledge levels are better for the wider population but the figures still reveal that work needs to be done – for instance, 29% are unaware credit scores are utilised for mortgages.
Clearly, for many, the whole nature of credit scores has passed them by, and you can bet that if you’re unaware of how scores are used, you’re unlikely to be aware of what your score actually looks like and what aspects of your score might be concerning or requiring repair.
Indeed, I’d go so far as to say that you’re also much more likely to be oblivious to what potential marks you might have against your credit report, and to what the overall impact of that might be. Have you forgotten those missed mobile phone payments or that you were once rejected for a credit card?
Going back to the younger age group however, there are a couple of points to be made. Firstly, while the average age of the UK first-time buyer is now well into their 30s, it’s not beyond the realms of possibility that you’ll be dealing with clients who are younger and looking to get on the first rung of the property ladder.
If there is a complete lack of understanding about credit scores then they are also likely to be unclear about what their own credit report looks like, at which point it would make perfect sense for advisers to be accessing this at the outset to see exactly what the true state of play is. Utilise a product like Credit Assess and you can also secure all the Open Banking data which will immediately put you on the front foot for when it comes to securing a mortgage.
Secondly, there’s also another element here and it comes with the increased use of the Bank of Mum and Dad, particularly if they are acting as a guarantor to their offspring, or they are utilising a Joint Borrower Sole Proprietor arrangement. Here, you’re going to have multiple clients/borrowers within the mortgage process and again you’re going to want to have all their financial information upfront before being able to proceed.
Not only are you therefore able to get off on a strong footing with these younger clients but, by helping, educating and supporting them through the entire process (plus potentially other members of their family) you are hopefully securing a client for life, plus all the potential referrals and recommendations that will follow from this.
For first-time buyer clients the whole process will be new and perhaps even bewildering. An adviser offers the perfect hand-holding arrangement and by using the credit report and banking data, you stand the best possible chance of getting them to their property destination in much better shape than they could ever manage themselves.