New way for lenders to identify struggling borrowers

Written by renxue January 09, 2008 14:27

Over recent years banks and lenders have been looking for various ways to try and get rid of bad debtors, particularly with bad debt levels rocketing and lenders losing huge sums of money in lost profits as a result of this.

According to a recent report lenders now have another way of finding out whether a borrower is at risk of defaulting on repayments on finance, and this could result in the borrower being forced to repay the debt in full early or face pre-emptive reductions in the amount that they are able to borrow from lenders.

This new method has been provided by the credit reference agency Experian, and is called Risk Triggers. Based on the information that is held by Experian the credit reporting agency will be able to alert lenders when borrowers are at risk of struggling with repayments. At the first sign of financial problems lenders can be alerted by the agency, and can then take appropriate action before another bad debt is accrued. Lenders may then demand early repayment of the debt before the borrower finds himself or herself in a situation where repayments can no longer be met.

The information provided with this new service will include when customers exceed their credit limits or when the customer has missed two payments. Another thing that will determine whether the borrower is a risk is a high level of finance applications being made in a short period of time. In the past this sort of information has been provided to lenders on a weekly or month basis, when it is often too late to take action. However, these risk alerts will be available to lenders on a daily basis, enabling them to act accordingly before it is too late.

Experian officials state that the service will also benefit consumers, as it will identify when their debts are getting out of hand so that they don't end up drowning in debts that they can never repay.

Tom Smith
27th November 2007