Credit check

Halifax has joined forces with Experian’s CreditExpert service to help mortgage applicants understand why their application was rejected.

Brokers back increased transparency in the application process but warn borrowers to check their credit score before applying for a mortgage and question the value of the service.

Lenders do not disclose details of rejected applications to borrowers but the European Commission’s mortgage directive in March proposed making it mandatory for lenders to explain why applications have been unsuccessful.

Last month, Halifax announced it is offering rejected applicants free, 30-day access to the CreditExpert service, which explains what is affecting their credit score.

Your Mortgage Decisions director Dominik Lipnicki says the service will not be helpful for everybody. He says: “For some clients with a very minor problem, such as not being on the electoral roll, it will be helpful, but prospective borrowers should check their credit score at the beginning of the process, not after they have been rejected.

“Halifax is trying to establish some loyalty from first-time buyers, hoping they will come back when they have fixed their credit score. That is great if it can be done quickly but it will not help most would-be borrowers as credit problems often take a long time to fix.”

IMF Mortgages partner Ian Marcusfield says: “The FSA or the Council of Mortgage Lenders need to publicise the benefits of getting a £2 credit report to see where there is room for improvement before applying for a mortgage. By the time people have applied it is too late.”

CML head of member and external relations Sue Anderson says: “I am not sure that is aligned with how we see ourselves in the market. We do not set ourselves up to be a consumer advice body.

“But it is good advice to a consumer to find out what their credit history looks like and how a lender might view them.”

Email Mortgages chief executive Michael White says the consumer press should have a bigger role in educating the public.

He says: “Consumer journalists should run with this and explain to people they should be checking their credit scores before applying for a mortgage. Experian has spent a lot of money promoting CreditExpert but too few people check their credit rating before making a mortgage application. Someone has got to champion this.”

White adds that intermediaries should actively promote the CreditExpert service.

He says: “From a professional perspective, every credible mortgage broker and IFA should have a link to Experian on their website for the benefit of their clients. It shows total customer care and demonstrates you are on their side.”

Many brokers recommend clients get a copy of their credit report before submitting an application. Intermediaries can only access a client’s credit file if the person is present.

In July, Omnii Solutions launched a new product that allows brokers access to a client’s credit file without them being present – but this is the only tool of its kind.

Mortgage Concepts Associates director Mike Richards would like to see this change so that brokers are authorised to access clients’ credit files on their behalf.

He says: “We have no way to go and get a customer’s credit file for them, they have to sit there with us. I would like to see brokers have more authority.”

But First Action Finance head of communications Jonathan Cornell says there is no need for this, as long as brokers prompt clients to obtain their credit files when the broker is completing a fact-find.

Cornell says: “I agree with the EU mortgage directive. It makes sense to tell people why they have not been accepted. I cannot think of any other industry where you apply for something and do not get to find out why you were not successful.”

If I Were You managing director Rob Clifford says consumers are often more concerned about finding out if there is another lender who will accept them than why they have been rejected.

He says: “Although consumers are interested in more information from the lender in the event of declination, what really matters to them is whether they can find an alternative mortgage or not.”

But SPF Private Clients managing director Mark Harris says he would like to see more lenders follow Halifax and offer similar services.

He says: “Anything that helps people understand how to improve their chances of getting a mortgage has got to be a good thing. I think other lenders will follow suit.”