The working world has changed significantly in recent years. It’s not just the ability to spend more of the working week away from the office, but also the way that we are paid, with notable numbers of people now enjoying multiple income streams.
The most common example is the self-employed worker, particularly freelancers who might have a handful of different gigs on the go at any one time. Between them those various jobs can deliver a comfortable income, despite the apparent complexity of forgoing a single employer.
It’s not just those that are out-and-out self-employed though. The financial challenges of the last few years have meant that plenty of people have opted to take on a side hustle.
While their regular job may have been enough to meet the monthly bills a couple of years ago, the persistently high rate of inflation has now put those budgets under strain, necessitating a little extra work on the side.
These side hustles can take on all sorts of different forms, from buying and selling vintage items to attempting to make your name on social media, and they can provide a significant injection of funds into the monthly cashflow.
Little wonder that studies earlier this year suggested that as many as half of us have set up some form of side hustle in the last couple of years.
However, while having more than a single income stream is helpful for their money management, all too often these people find that the apparent complication of their set up is an impediment to accessing the mortgage funding they need.
More than a score?
One of the biggest challenges borrowers with complex incomes face is the credit score. Some lenders are happy to embrace credit scoring as a way of assessing prospective clients, essentially relying on the score to tell them the whole story.
But as anyone who has worked with clients in this position knows, there is always more to it than simply a score. All too often those with complex incomes are judged unfairly when using the score alone, since only part of the picture is taken into account. There may be additional elements of income that would dramatically improve their prospects, but which fall outside the scope of the credit score and so are ignored.
Getting the full picture
That’s why it’s so important for brokers to work with lenders who adopt a different approach, and instead recognise each client is unique. Judging them by a credit score is so often going to lead to disappointment, whereas taking the time to get to know their circumstances in greater detail means the lender is able to make a much more considered decision.
It’s only by taking the time to dig into a client’s circumstances, and paint a fuller picture of their ability to repay, that lenders can really make an accurate and fair assessment. We know from experience that this more complete appraisal often means being able to support clients with complex incomes who might ordinarily have been turned away by high street lenders who put so much stock in credit scores.
Understanding what borrowers need
It’s not just on complex incomes where this approach pays dividends. All too often clients who fall outside of the norm in some way are treated more harshly by lenders, are denied funding they can more than comfortably repay simply because they are not entirely ‘vanilla’.
It could be because they are an expat, or are looking to borrow into retirement. It could be that they are looking to build their own property, or purchase a new build, and so fall outside the regimented criteria employed by some.
Understandably this can leave clients enormously frustrated, and brokers too. All advisers take great pride in being able to support their borrowers in accessing the required funding, even if their circumstances are a little out of the norm.
At Dudley Building Society we are proud to work differently, to take the time to get a more informed impression of borrowers and their circumstances when judging an application. Rather than seeing potential complications as an automatic red flag, we focus instead on getting a better understanding of what’s important.
The coming years are only likely to see greater numbers of borrowers embracing the potential benefits that come from having additional income streams and sources, so it’s crucial that as an industry we work together to support them with their home ownership aspirations.
Relying on the credit score is not going to cut it.
Rob Oliver is distribution director at Dudley Building Society