New insights from Experian’s Credit Barometer suggests consumers’ chances of getting approved for credit are now 60% higher than at the start of the COVID-19 lockdown
Consumers now have a wider choice of credit cards and loans, because more lenders are returning to the market as the COVID-19 lockdown restrictions ease. Around half of lenders had previously withdrawn products.
The Barometer shows that at the start of the lockdown, just one in four (25%) people searching for a loan found a product they were likely to be accepted for. In addition, 60% of those searching for a loan did not see any offers matching their credit needs.
Currently, 40% of consumers searching for a loan through price comparison service will see a product they have a strong chance of being accepted for. Of these, around two-thirds (63%) will be pre-approved, meaning they are guaranteed to be accepted for that product.
The demand for credit cards and personal loans has rebounded since COVID-19 lockdown measures were eased, although more than a third of borrowers are still unable to access credit. Experian says that 38% of those searching for a loan in July were unable to find a deal that met their requirements, down from 60% in March, at the start of the UK lockdown.
Amir Goshtai, Managing Director of Experian Marketplace said “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.”
Credit card products have returned to the market at a slower rate to loans. More than one in four (26%) consumers did not see a single credit card they were likely to be accepted for at the peak of lockdown, compared to just one in ten (10%) that saw the same result at the beginning of March.
However, acceptance rates for credit cards are beginning to bounce back as over one in two (53%) are now likely to see at least one lender with a strong chance of lending to them, when searching for a card.
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.”
“People looking for credit should regularly check their credit score and use comparison services such as Experian’s, to compare credit products until they find the right product for their needs. They can also be reassured that this won’t harm their credit score but give them the knowledge to apply confidently when their eligibility improves.”
“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.”
As consumers’ employment circumstances began to change through lockdown, Experian added two new questions on employment status and sector for those searching for a loan. These insights give lenders a broader view of an applicant’s affordability, helping them to make more informed lending decisions.