Equifax, the consumer and business insights expert, has unveiled a new tool-set of creditworthiness and affordability indicators. The indicators incorporate borrower current account turnover data to help lenders make informed, responsible lending decisions through enhanced understanding of a customer’s financial background and estimated income level.
The combined insight on a borrower’s income, outstanding debt and credit usage will provide lenders with a clearer understanding of a customer’s capacity to make repayments, and the most appropriate credit terms for a loan.
By more accurately estimating a borrower’s ability to afford a loan, lenders can address challenges posed by regulatory requirements to identify potentially problematic debt or financial vulnerability. The tool-set can be used at point of application, and over the lifetime of the credit agreement, enabling lenders to monitor affordability for both new and existing customers.
Key components of the new offering include:
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- Current Account Turnover (CATO) Affordability Indicators – provides information on the customer’s current account turnover, level of unsecured debt relative to turnover and significant changes to turnover.
- CATO Affordability Index – helps lenders segment and monitor their customer population with evidence of income level (turnover) and current account usage and to establish the appropriate credit terms for individual circumstances.
- Credit Indicators – provides a transparent view into key indicators of current and future financial distress to assist lenders with fair and tailored treatment of their customers.
Jake Ranson, Banking and Financial Institution expert at Equifax, said: “Assessing a borrower’s capacity to meet their repayments is increasingly vital to protect against over indebtedness. These new creditworthiness and affordability indicators are an important part of our strategy to use new data insights to deliver enriched intelligence to our clients. The tool-set will assist lenders in meeting their responsibilities to their clients and their regulators, providing a comprehensive picture of a borrower’s financial standing, and a transparent view of signs of credit distress.”