opinion
Whether the media is talking us into a recession or we are really hanging on the edge of economic downturn the fact remains that, for many people, getting credit is becoming increasingly difficult.
But whilst some consumers are tightening their belts in preparation for frugal times, recent research has revealed a concerning trend in over expenditure. Findings showed that every month one in ten adults is spending more money than they earn. For those living beyond their means overdrafts and credit cards have become an essential financial crutch.
CIFAS' latest figures for the first quarter of 2008 show that first party fraud has increased by over 13%. Consumers are increasingly omitting previous addresses from application forms in an attempt to conceal a less than glowing financial past.
All of which is worrying reading for any lender, especially as they face the challenge of managing their debt portfolio whilst also demonstrating responsible lending processes. So now, more than ever, it is essential that lenders get credit decisions right first time.
When it comes to making robust decisions on credit applications, scoring and risk assessments are nothing new. But now the development of more sophisticated and bespoke credit decision models, which bring together multiple credit bureaux searches, is helping to provide lenders with much needed insight at the point of application. As always, the key is in understanding how best to use this information once you have it. The process of interrogating a variety of sources of information is a positive, and can support a robust recommendation through the identification of any differences that exist between data sources, which can be instrumental in the final risk assessment.
Of course, as long as there are consumers who feel that dishonesty is the best or only policy, the threat of first party fraud will be present. But thanks to greater transparency, a more open approach to sharing data and the development of specific credit abuse models to help highlight likely instances of fraud at the point of application, it's becoming easier to recognise and prevent cases from occurring. Using this approach in conjunction with all other available application processing decisioning tools can be instrumental in enacting a fair yet robust defence to this perpetual problem.
Click here to view the article as it appeared in the magazine
Click here to download Adobe Reader for free
