The Credit Crunch

Where does the burden of responsibility lie?

The recent focus on Northern Rock and the ‘troubled’ economy is pushing consumers to question how the Credit Crunch will really affect them and what extra pressure this will pile on their financial outlook. Some are also asking where the blame for the current financial crisis and the UK’s growing over-indebtedness should lie - with the lenders or the consumers themselves.

The reality falls somewhere between the two. After all, the Credit Crunch comes as a result of US mortgage lending in the sub prime market, to people who, while wanting to own a property, could ill afford the repayments.

But of course it had a knock on effect in the UK and this week’s headlines have provided a real wake-up call to British consumers. While initially it may be only customers of Northern Rock who are concerned for their savings, the extensive media coverage is an opportunity for all consumers who both save and borrow to assess their current financial health, and crucially, not take on additional credit they can ill-afford.

In an attempt to reduce debt, consumers need to move away from the ‘buy now, pay later’ attitude and move towards the ‘save now, buy later’ mentality. On the other hand, financial institutions need to constantly review their lending policies to ensure that they are making responsible decisions and do not end up with a customer base who cannot afford their repayments.

Melanie Mitchley, Director at Callcredit, comments:

“No one wants to go back to a time where it was difficult and time consuming to access credit, but in the current climate we need to see more responsible lending and borrowing. Lenders are more wary of taking on riskier consumers and are looking to more sophisticated and intelligent ways of evaluating requests for new or increased credit. Part of this is about new and improved data availability, and part is relying on new technologies to use this information more effectively.

At Callcredit, we are the only Credit Reference Agency in the UK to supply lenders with daily alerts of any problems that consumers might be experiencing, and a holistic view of a consumers’ affordability. This is a huge benefit for lenders as, combined with the data available to them via a traditional credit report; it allows them to more accurately assess whether someone can truly afford more credit.

“As well as lenders being more vigilant, my advice to consumers is, before taking out another loan or credit card, just stop and ask yourself, ‘can I really afford this additional credit?’ Also, take a look at a copy of your credit report, as it will help you get an overall picture of the current state of your finances and help you answer this question”

With the UK’s debt mountain currently standing at £1.25 trillion and growing, banks and consumers can no longer afford to take financial risks – we all need to act responsibly and take control.”

About Callcredit:

* Callcredit (www.callcredit.co.uk) is the UK’s most innovative, state-of-the art credit reference agency, with an extensive range of information and value added services for businesses and individuals.

* MyCallcredit is the is the consumer arm of credit reference agency Callcredit and provides consumers with online access to the details of their credit file at http://www.mycallcredit.com/

* Callcredit has harnessed state-of-the-art information technology with an unrivalled knowledge of the industry’s needs to develop a range of innovative information solutions. Solutions that are enabling major lenders and a host of other blue chip companies to address regulatory requirements, make better credit decisions, target new customers more effectively and manage existing customers more profitably.

* Callcredit forms part of the Skipton Information Group, and is one of five core businesses along with database management company EuroDirect, market analysis firm GMAP Consulting, online payment service provider, Legatio and DecisionMetrics, specialists in the development and implementation of scorecards and affordability assessment.

For further information, please contact Sophie Smith on:

0207 067 0415

ssmith {at} golinharris(.)com