As we finally see some blue skies emerging and rush to embrace the onset of what might just be an actual summer, change is also in the air for many people across the UK when it comes to the lifting of restrictions (hopefully), furlough and their finances.
The Coronavirus Job Retention Scheme (CJRS) has been in place for over a year now and it has proved critical in keeping many businesses afloat and ensuring that many thousands of people have been able to maintain some form of income through this challenging period. However, the winding down of this scheme, starting in July and ending in September, will inevitably have repercussions on the finances of businesses and individuals across the UK.
Additional pressure on a host of financial scenarios has been evident through changes in the short, medium and longer-term employment status of many people. The speed at which these changes materialised left people with a range of financial burdens, resulting in some increased levels of debt and adverse credit. Adverse credit is not something which has simply appeared over the past 12 months or so, it’s an area which the mortgage market has recognised and serviced over many years.
From an intermediary perspective, it’s important to appreciate any trends relating to adverse credit, how to identify these and how to provide access to the right solutions if and when possible. As such, it was interesting to see Pepper Money identify the most common reasons for people to have an adverse credit record as part of its Adverse Credit Study with YouGov.
The most common reason, shared by 73% of people with an adverse credit record was suggested to be a simple missed credit payment, and 43% of all adults who have missed a credit payment said they have missed more than one. The second most common reason was highlighted as being missing several credit payments, resulting in a default, which have been experienced by 35% of people with adverse credit. Just over a quarter (27%) were said to have entered into a Debt Management Plan and a similar number (26%) have unsecured arrears.
Just over one in five people with adverse credit (22%) have had a CCJ registered against them in the last three years, and this has increased from 18% since the research was last carried out in autumn 2020. The least common reason for adverse credit was secured arrears, which has been experienced by 18% of people with adverse credit.
As outlined in the study, many of these represent small missteps, often without people even realising. Getting to grips with a client’s full financial picture is never easy at the best of times and during any period of financial flux the difficulty associated with this task amplifies. Fortunately, technology has come to the rescue. Solutions, platforms and systems – such as Click2Check – are being developed which offer clients easier access to, and better control over, their finances. Importantly, they can also work hand-in-hand with the advice process. And this combination is crucial when servicing a wider range of mortgage related needs – from the heaviest of adverse credit through to the most vanilla residential lending – in the cost-effective and time-efficient manner.
David Jones is director of Click2Check