Individuals chance of being approved for a loan is now 60% higher than at the start of lockdown in the UK due to a rise in consumer eligibility, according to Experian’s latest Credit Barometer.
According to the company’s earlier market data from 29 March 2020, 25% of people searching for a loan at the start of the lockdown succeeded in finding a product they were likely to be accepted for, whereas 60% of people could not find any offers matching their credit needs.
One contributing factor was that around half of lenders had withdrawn their products from the marketplace, focusing on collections to boost cashflow during the crisis. However, this appears to be reversing as lenders return to the market following the easing of lockdown restrictions, meaning that consumers’ eligibility for credit is improving.
Looking to the end of the lockdown in July this year, the number of consumers that did not see a single loans product matching their needs dropped to 38%.
Amir Goshtai, managing director of Experian Marketplace, explained: “Analysis from our latest Credit Barometer provides some welcome encouragement for people seeking loans. Eligibility ratings give people an indication of their chances of being approved for a specific credit deal. These ratings are now edging closer to pre-lockdown levels as lenders grow in confidence and start returning to the market, improving consumers’ chances of being approved for credit.
“At the moment, our panel of brands offering loans stands at 79% of what it was pre-lockdown, showing signs of improvement in the credit market.”
Experian also revealed that since 14 July, 40% of consumers using its price comparison service to search for a loan have seen a product they have a strong chance of being accepted for. Of these, some 63% will be pre-approved for the product.
The company has decided to implement two new questions for consumers searching for a loan based on employment status and sector. This is hoped to provide further information on consumers’ employment circumstances due to the furlough scheme, and give lenders a broader view of affordability.
Goshtai added: “We understand this is a challenging time for many and not everyone will be in a position to attain credit. But people shouldn’t feel disheartened if they find their chances of being approved for credit are low. The market is changing daily and so is consumer eligibility. By building their credit score, consumers can put themselves in the best position to take advantage when lenders review their eligibility criteria.
“And in the meantime, we will continue to work with lenders to understand their risk factors so people are better informed and help consumers share additional information that helps improve their chances of approval.”