Healthier market will push lenders to rethink automated credit scoring
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Industry experts predict that when the market gets back on its feet and competition increases major len-ders will be forced to change their automated credit scoring systems.
Melanie Bien, director at Private Finance, says lenders that solely use these systems to choose who they lend to will have to change if they want to expand in the future.
She adds: “The big lenders have limited funds so they’re fussier about who they lend to and I think that will continue for a while yet.
“They still prefer plain vanilla customers with good credit files. That is fine to a point but when they need to attract more business they will have to start being more flexible.”
Ray Boulger, senior technical director at John Charcol, says lend-ers are driven by costs and volume so they may use a mixed approach.
He adds: “For smaller mortgages this approach may not be worth the resources for the few mortgages that might be refused. But if lenders had to compete for business we may see a change. However, for the time being it will be pretty black and white.”
The predictions come after Alder-more’s recent comment that a lack of skilled underwriters at lenders is harming the housing market. Its survey of 200 mortgage brokers asked what percentage of mortgage enquiries had been declined over six months because clients did not achieve a high enough credit score.
Some 88% of brokers confirmed that their clients were regularly declined by lenders’ automated credit scoring systems.
Colin Snowdon, chief executive of residential mortgages at Alder-more, says: “These figures reveal the extent to which lenders let skilled staff go during the reces-sion. They are now over-reliant on technology to make lending deci-sions and have no other way of sorting the wheat from the chaff.
“The evidence we see suggests that banks and building societies have raised the bar for borrowers to clear to qualify for a mortgage, so perfectly creditworthy borrowers are being declined regularly.”
