Over a fifth of adults could be prevented from getting a mortgage
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Kensington says over a fifth of the UK adult population could be prevented from getting a mortgage by lenders that operate a rigid automated credit scoring system.
The lender, which launched a range of new products at the beginning of March, surveyed more than 2,000 adults in the UK and found that 13% had not taken out any financial product before the year 2000.
It says that with credit agencies unable to access data on accounts opened before this date, it means that these six million people may not have enough activity showing on their credit record to pass an automated credit score.
In addition, 9%, or more than four million, people do not know for sure whether they are on their local electoral register, which again could seriously hamper their chances of passing a credit score.
Charles Morley, head of sales and product development at Kensington, says: “The best buy rates on many prime deals are only available to the select few who meet a long list of rigid criteria and, as a result, many good borrowers are being prevented from getting a mortgage because their circumstances are slightly more complicated than can be accommodated by an automated credit score.
”If mortgage brokers have any clients who have failed a credit score there may be a simple reason why they were rejected by an automated system even though they are a perfectly credit worthy customer.”
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Readers' comments (14)
Anonymous | 17 Mar 2010 11:42 am
This is a great article highlighting the problems caused when institutions rely on automated decisions. The very idea of 20% of mortgage applicants being rejected is frightening, and likely to have a massive long term effect on the economy in general. Computers will only do what they are told to do. Common sense manual underwriting in essential to any recovery, with any perceived risk being justified by the lender, and reflected in their pricing. The sooner we get back to cases being judged on their merits the better. We have just about exited the worst recession in living memory which is bound to have had an effect on credit ratings for thousands of people. One lender prepared to enter the market to cater for these clients will kick start the market.
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Anonymous | 17 Mar 2010 12:11 pm
Very enlightening artical, it is great to see that a company is finally considering looking to use its staff with underwriting experience/knowledge to take a view on each individual case rather than sole use of an an automated system. Hopefully there will be more companies out there willing to take this route .
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Grey Haired Underwriter | 17 Mar 2010 12:15 pm
You can't have your fast track and eat it! Personally I have always been anti-scoring because I saw some of the ludicrous decisions it made, both for and against, notwithstanding that scoring is too easily manipulated by the Executive of any lender. Or to put it another way - the Marketeers and Sales staff who networked their way to the top were in charge of something they didn't understand.
The biggest problem going forward is that many of the most experienced manual underwriters were dispensed with more than a decade ago and were replaced by low paid machine minders who were given the honourific of underwriter. Replacing scoring with reality is therefore very difficult and I doubt that many lenders actually want to pay the going rate for a good underwriter.
In simple terms the big boys will continue to tinker with their PCs and take the cream of the market because they can offer more cheaply. Anyone who doesn't fit scoring will have to pay the going rate for failing the score no matter how unfair that may be.
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Anonymous | 17 Mar 2010 12:22 pm
Could not agree more regarding how computer management is ruling the lending processes. The Computer says NO becomes a reality and not so funny. Call me old fashioned but going back to the days when a building Society Manager and Bank Manager were proper managers of their business. Knowing your customer meant something and also meant doing good business and controlling business activity. Oh yes we did have basty moments but nothing like what we have experienced recently. Empower individuals to make proper decisions about lending and we might just get things back to some proper lending eventually.
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Anonymous | 17 Mar 2010 12:23 pm
Mortgage fraud is reaching epidemic proportions. Prison sentences have never been higher. CIFAS announced last week that mortgage application fraud has reached new record highs. To look for more paper in those circumstances beggars belief.
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Anonymous | 17 Mar 2010 1:24 pm
Re the comment above on mortgage fraud - do you think it's easier for fraudsters to beat a computer based scoring system providing decisions based on the data entered into the system or an experienced underwriter who can spot that something on the applciation that doesn't add up?
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Robin Banks | 17 Mar 2010 2:16 pm
This article should be read in conjunction with todays FSA's announcement on the same page.
What is it that the Labour Party once said ? "things can only get better" Not if you're in the Financial Services it can't, re-write that song to "things can only get worse".
Put the old fashioned underwriters back in the system and do it quickly. As one poster has already intimated, a computer system is far easier to beat than a human with years of experience.
The first lender to come to the market with an annoucement of going back to basics (sorry, that's another political cliche!) will be quids in before the high street morans have even noticed. Good luck who ever you are.
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Anonymous | 17 Mar 2010 3:34 pm
Credit scoring is very useful for assessing people you do not know or for people in a market place that you have limited experience. Need I say anymore!
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John Williams | 17 Mar 2010 4:09 pm
Its very enlightening to see someone with a bit of common sense. I have recently applied online with two different high street lenders for two different clients for a 90% mortgage, both were declined by the computer that likes to say "no". I asked both lenders for a reason and was given the stock answer " they need to have a look at their credit file". Their Experian report was perfect and thier credit scores were the maximum possible of 999. Giving their response, the lenders have stated that they do not use Experian but, Equifax. Do they not believe computer data anymore or is paranoia the norm from now on. I persoally think that most 90% products have a limited availability and if you are in the wrong queue on the wrong day, you are out of luck
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Anonymous | 17 Mar 2010 4:24 pm
Well said Robin the first lender to dare to enter the market with a desire to lend with risk priced for will clean up. I suspect one of the American banks who ran off will come running back pretty soon with rich pickings to be had. I for one would welcome them back with open arms assuming the lessons have been learnt from the boom time debacle
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