In the first part of this series, we’ve gone through the ‘what is’ of our enhanced credit scoring solution. In this second article, we’ll dive into the ‘why’ – the concrete benefits it brings, and how it can positively affect consumers’ lives.
It’s no secret that traditional credit checks don’t always work for everyone. Things happen, lives change, people move – but their financial records can’t always keep up. Enhanced credit scoring solves that, giving more people access to credit, and fairer results.
The first obvious benefit an enhanced credit-scoring process brings to consumers is a much better user experience. No complicated applications to fill, no days spent waiting anxiously for an answer. Since it’s based on financial data that’s pulled straight from people’s banks through aggregation, it can be done with a few clicks – and provide instant results.
But that’s just scratching the surface. The more significant impact it makes is giving more people access to opportunities, and better opportunities at that.
Enhanced credit scoring does this by giving lenders or other financial service providers access to real-time financial information, and insights into spending and consumption habits – so they can assess risk more accurately, and in a way that’s more inclusive too.
Many people are underserved or even completely excluded from credit products. It’s not because they have high risk profiles, but because they don’t have a long history of financial records in their country.
Those who are starting their first job straight out of university, for instance. Or people who move abroad to work. Traditional credit checks will be a lot tougher for them, even if they are very responsible with their spending, and live well within their means.
An enhanced credit-scoring solution removes this bureaucratic barrier. No records of tax returns in this country? No problem. And, as a consumer, you don’t need to go after special documentation or ship your financial records either. You can let your financial data do the talking, and your transaction history will vouch for you.
As a bonus, it will probably paint a much more comprehensive picture of your financial situation than you would get from traditional records.
Once the credit inclusion barrier is overcome, there’s something else everyone can benefit from: better deals.
People that don’t have an established credit history may also be unfairly bogged down by high interest rates. Once again, looking at someone’s current finances can lead to fairer results, since having reliable and more accurate assessments lets credit providers operate in a more sustainable way.
In some cases, escaping your credit history can be a big challenge. Even a small mistake like forgetting to pay a bill on time can set back someone’s credit rating for years. With traditional credit checks, people are often judged by their past, no matter how much their life has changed – for better or worse.
People who improve their financial situation over time get the short end of the stick when they want to apply for a credit product. And conversely, businesses may end up suffering when extending credit to someone whose finances have taken a recent downturn.
No one wants to be stuck in the past. Using real-time data keeps things grounded in the present situation while also delivering fast, straightforward experiences that consumers expect in this digital age.
Want to learn more? Check our enhanced credit-scoring solution page. And stay tuned for the final article in this series, where we’ll dive deeper into the tech that powers our enhanced credit scoring solution.
Northmill is on a mission to build personalised banking services that improve people’s finances. By plugging Tink’s open banking technology into its app, Northmill will deliver a seamless and relevant customer experience.
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