Taking away the awkwardness of adverse credit

Thankfully we appear to have moved forward a long way since then, but certainly when it comes to people’s finances there can be all sorts of complex emotional struggles to get over, particularly when it comes to a credit report that might be less than clean.

Indeed, while the client might think they should adopt their own version of that policy – perhaps entitled ‘I won’t tell, please don’t ask’, what this actually does is store up a heap of trouble that advisers will need to unpick when the truth does come out.

Let’s be frank about this, it’s not the nicest part of the client interaction to have to go through their finances with a fine-tooth comb, particularly if there are some issues within there that the client is not particularly proud of and would normally like to keep quiet. But we’re all acutely aware that this is a vitally important part of the advice process and needs to be done.

Those conversations could be as awkward as Matt Hancock suggesting Date Night to his wife, but they certainly need to be had because, as mentioned, they just end up meaning more work for all concerned and there’s no way they are going to slip through the net.

Indeed, looking at some recent research from Pepper Money the reality is that clients are now much more likely to have some form of adverse credit on their files anyway, and clearly the financial difficulties that have been raised for many by the pandemic are going to play a part here.

Pepper suggest that 73% of borrowers come with adverse credit on their file due to “a simple missed credit payment” – cited as the most common reason – while 35% of adults with adverse have missed several payments, 27% have a debt management plan, 26% have unsecured arrears, and 22% had a CCJ against them in the last three years – up from 18% since the research was carried out last Autumn.

So, you might be able to see where this is heading, and while the finance industry has been good in terms of the forbearance measures it has adopted, its openness to payment holidays and the like, these sorts of credit issues are not going to be overlooked or not seen, and particularly when it comes to mortgage finances, lenders are going to be looking into them and basing their lending decision in part on them.

That may well scupper the borrowing intentions of many clients who come to you, the adviser, with thoughts of being able to secure that market-leading 0.99% fixed-rate product, but with their credit issues are not going to be able to get anywhere near them, and may have to go down the specialist residential route instead.

In this regard, forewarned is undoubtedly forearmed, and what advisers tend to want is the full picture upfront so that they are not looking at product solutions that will never get through the initial part of the process, will be returned, and will need to be reworked.

It also takes away some of that awkwardness around the client interaction if they know, you know, exactly what the situation is. Or perhaps, in some cases, you know what they don’t know, if they don’t understand what missing a payment means for their credit file, or for example, they simply have no recollection of having done that.

Using a product like Credit Assess should take away all of this anxiety and the potential for mis-understanding because by delivering the credit report and the Open Banking data, the financial picture should be complete at the outset and you, the adviser, will have total clarity about what you’re dealing with, and the potential path this will have to set you upon.

Every single client would like to have access to the mortgage that is cheapest each month for them, but that’s not always going to be possible. You might well say that, given the increase in client finance complexity, that’s increasingly unlikely to be possible, but at least by knowing your client’s recent financial history, you’ll be able to make this call early and they won’t be labouring under the misapprehension that it’s achievable.

As the research shows, adverse credit is become more prevalent as part of a client’s situation, but the good news is there are plenty of options currently available to them, and by having that information you’ll be able to deliver the best, most affordable mortgage for them right now.