With the Mortgage Market Review due to be implemented in April 2014, there is inevitably a considerable amount of change in the industry at the present. But, against this busy backdrop, one thing that advisers may have overlooked is that of credit abuse.
The term credit abuse is used by lenders when undisclosed adverse credit is found to be registered against the customer. It is often found at addresses which have not been disclosed at the mortgage application stage.
Intermediaries are required to make declarations on behalf of their customers reflecting their true financial history. This is a key part of the application process which will be used to ensure a full and accurate credit assessment is made. A false declaration will impact a customer’s ability to secure the required mortgage and may impact on their ability to obtain future credit.
Lenders will check credit bureau information and files for up to six yearsso all adverse data should be declared. No matter how small, it will be picked up by lender’s credit score.
Advisers that fail to disclose everything fall into the category of non-disclosure and lenders could consequently become concerned about their relationships with customers. This demonstrates the importance of brokers getting to know their customers.
It is therefore prudent for brokers to ask customers to obtain a credit report prior to submitting a decision in principle or application. Not only will it highlight any adverse credit and previous addresses, but also other lending the customer may have forgotten about, such as ‘buy now pay later’ loans and old credit cards with nil balances.
By closing old credit or store card accounts customers can increase their overall credit score.
The key point is for advisers not to try to underwrite cases themselves. Quite simply, don’t dismiss anything, but make sure everything is disclosed.