The “right to know rates before applying for credit” campaign moves apace' discussion

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This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.


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  • bonzer
    bonzer Posts: 399 Forumite
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    I was thinking, would a better phrasing be that credit reference agencies should be prevented from showing lenders search footprints and only be able to show them products you currently or have previously actually held?

    I think I'd still want search footprints to be present on my credit file (for me to see only) for ID fraud prevention such that I can see if someone is attempting to gain credit in my name. Someone may apply for credit in your name but not be successful. Also it's useful to keep a record of who has looked at your file for data protection reasons to show that the information is not being given out indiscriminately.

    However I entirely agree it's unfair that lenders can see and make use of search footprints.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    I encountered an even more outrageous example from Alliance & Leicester earlier this year. Looking to borrow for market investment I checked that that was one of their options, checked the don't share my personal information box and proceeded. Then was told that they don't really offer that product but that they had done a full application search anyway even though there was no possibility at all of me getting the product.

    I can understand misleading advertising of a product they didn't offer, since that could potentially cause dishonest people to disclose their real purpose. Harder to see as reasonable is the accompanying application search that merely penalises honest people who accurately say what they are looking for.

    bonzer, a serious concern for lenders is that people may be desperate for money and may make many applications very rapidly. For this reason there is a legitimate need to show searches fairly early in the application process and also a need to make them visible before the first monthly reporting of account status. This way other lenders can see that there is a possibility that credit might be granted.

    The interesting wrinkle in my case was that the product didn't exist, so there was no prospect of me obtaining credit from that source, eliminating the reason for the early reporting of an application. Even if there was some apparent need for it due to system design, I don't see a legitimate reason to keep the search around once it was clear that the product wasn't offered.
  • bonzer
    bonzer Posts: 399 Forumite
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    If you were applying for a job, would you think a potential employer should be able to see how many applications you have sent or how many rejection letters you have received? If they could it might alter their opinion of you or the salary they offered you. It wouldn't be fair.

    Applying for credit is kind of similar. They're appraising you on the basis of what other companies think about you. Those other companies may reject you for many reasons, none of which may be related to your credit worthiness e.g. perhaps you're not profitable enough to them.

    Some people might need to make an awful lot of credit applications to find someone who will lend to them at a sensible rate. In the same way some people might need to make a huge number of job applications before one comes good.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 3 October 2009 at 6:16PM
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    For an early credit application search the lenders don't know whether the application was accepted or declined. They only learn that a month or more later when the first report of monthly account conduct arrives, or as much as a couple of months later when it doesn't arrive and they can conclude that the credit was either not granted or not accepted by the applicant.

    The problem for the lenders is determining who is going to accept every offer they get and who is shopping around, when all cases generate an application search. Affordability and available credit are significant issues for lenders, since they affect default rates.

    Quotation searches should reduce the issue for those who are shopping around, though they won't for places like Zopa that decline 80% or so of those who successfully get a quotation. Zopa itself addresses that by using only a quotation search until final acceptance (and perhaps beyond...).
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