affinion international: credit management research

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CREDIT MANAGEMENT RESEARCH

CONLUMINO & AFFINION

SEPTEMBER 2014

CREDIT MANAGEMENT RESEARCH

CONLUMINO AND AFFINION

Credit management report

© 2014 Conlumino [email protected] | 020 7936 6654

Credit management Prepared for September | September 2014

Affinion International Ltd 50 Charter Court, Slough, Berkshire, SL1 2EJ 01753 753338 [email protected] www.affinioninternational.co.uk

Conlumino 7 Carmelite Street, London EC4Y 0BS 020 7936 6654 [email protected] www.conlumino.com

In today’s world it is easy for organisations to gather and view information on our financial behaviour. This information presented via a customer’s credit profile, plays a critical role in determining whether or not we get all manner of financial services. A customer’s credit report, is a tool that consumers can, and should, use to see how they’re likely to be viewed by lenders and take appropriate action to better their chances of getting credit as well as monitoring for unusual activity which could be an indication of fraud. In this report we have looked at consumer views on credit reports, including their usage and understanding of them. The findings reveal that whilst consumers have reasonable understanding of their credit reports, they lack knowledge of what to do with the information and would greatly value more help and assistance from banks and others, on how to better manage and improve their credit profile. There is significant appetite amongst consumers to learn more and a clear opportunity for organisations that are prepared to engage with them. We hope you find the findings useful and interesting. About Affinion International Affinion International, a division of Affinion Group, provides a wide range of protection and lifestyle products that offer value to consumers whilst building additional revenue streams and increased customer-to-brand loyalty and engagement for its partners. The division is made of more than 1,200 employees and offers services in 17 countries throughout Europe, Africa and South America. Over the past 15 years, Affinion International has built an impressive client base that includes 13 of the top 20 EU banks and many of Europe’s premier brands in travel and retail. For more information, visit www.affinioninternational.co.uk

Contact details




Key findings in brief

•  The vast majority (88%) of consumers know what their credit profile is and what it is used for.

•  A majority (70%) of those who have looked at their credit report have a reasonable understanding of the information contained in the report.

•  However, people are not stimulated into using their credit reports with only 25% of people having looked at their own in the past year.

•  Only 20% of people know what their current credit score is and almost 80% do not know how long personal information is held on their reports. Half of people would not know what to do to correct an error on their report.

•  A key reason for apathy around using the report is a lack of understanding of what to do with the information and how to use it effectively.

•  With a third of people currently taking steps to manage their credit reports and 1 in 5 planning to do more in the future, there is significant appetite from consumers to know more about managing their profile.

•  Almost half of people say it would be helpful to know more about the steps they can take to manage and improve their credit profile and 46% think would like their bank to do more to help them – this rises to 57% among 25-34 year olds.




Summary

Most people know what a credit profile is The majority of people are aware of credit profiles and know what they are. Moreover, only 11% rate their knowledge of what a credit report is and what it is used for as being poor. Knowledge is consistently high across all demographic segments, although there is slightly lower awareness among the very youngest consumers (18-24s).

But only 20% know their current credit score Despite the knowledge of what a credit report is, only 20% say that they know what their credit score is. Notably, younger consumers are better informed than their older counterparts, perhaps because of their greater propensity to use credit and their wider array of financial commitments. While 27% of 25-34 year olds say that they know their score, just 12% of those over 65% are knowledgeable. There is also a social divide with ABC1s much more likely to know their scores than C2DEs.

Lack of knowledge about how to use reports One of the issues appears to be that while people know what a credit report and score is they are less aware of how to actively manage them. As such, knowing a score becomes something that is interesting rather than something most people can put to use. Around half of those questioned said that they would like to have more information about managing their profile. This was further reflected in the open responses with a number of people saying that they would like guidance as to how to improve their scores and use the credit report as a tool for doing this.

Lack of knowledge means usage is infrequent Not seeing the credit score as a tool that can be managed means that most people do not look at their reports frequently. Only 4.2% say that they look at their report very often with a further 16% saying that they check it quite often. Around a third say they look at their report rarely and just under a quarter have checked it only once. For many people, the last time they checked their credit report was a year ago or more.




Summary

More guidance is key to increasing usage Around half of respondents would welcome more guidance about using the report in understanding how different elements of the credit score – such as missing a payment – affected the overall score and how the score would change if they remedied these things. Around half would also be open to their bank doing more to help them use their credit reports effectively.

1 in 4 are concerned about getting credit Nearly 1 in 4 of us are concerned about being able to get credit; this rises to 40% among 25-34 year olds – the demographic that is often hard pressed with mortgage commitments and establishing a family. In terms of region, London the North East and Wales all have higher than average levels of concern about being able to get credit.

But more people are intending to manage profiles in the future The above noted, with a third of people currently taking steps to manage their credit reports and 1 in 5 planning to do more in the future, there is significant appetite from consumers to know more about managing their profile.




Credit profiles

Do you know what a credit profile is? All figures are percentages who know what a credit profile is

The majority of consumers know what a credit profile is

88.0 89.2 87.1

71.7

89.3 90.2 89.5 87.7 86.0 89.5 91.8 85.8 84.8

All Male Female 18-24 25-34 35-44 45-54 55-64 65+ AB C1 C2 DE




Managing credit profiles

Do you currently take steps to manage your credit profile? All figures are percentages

Just under a third currently manage their credit profile

•  ssss

Yes 32.4%

No 67.6%

Segment % who manage credit profile

Male 31.9

Female 32.8

18-24 36.7

25-34 39.8

35-44 33.2

45-54 32.0

55-64 25.5

65+ 29.2

AB 38.5

C1 36.1

C2 30.2

DE 25.4

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4





Do you plan to do more to protect and manage your credit profile in the future? All figures are percentages

1 in 5 plan to do more to protect and manage their credit profile in the future

Yes 20.7%

No 40.8%

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

Not sure 38.5%

Segment % who will do more to manage credit profile

Male 19.9

Female 21.3

18-24 35.0

25-34 31.0

35-44 24.4

45-54 19.5

55-64 12.3

65+ 11.5

AB 25.4

C1 23.7

C2 22.6

DE 14.4





Would it be helpful to know more about the steps you can take to manage Your credit profile? All figures are percentages

Just under half of people would like to know more about managing their profile

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

Segment Yes No Not sure

Male 47.9 31.8 20.3

Female 44.3 30.7 25.0

18-24 41.7 33.3 25.0

25-34 53.7 27.8 18.5

35-44 52.2 27.5 20.3

45-54 44.2 29.4 26.5

55-64 38.3 36.4 25.3

65+ 40.7 34.3 25.0

AB 53.4 29.0 17.5

C1 48.8 29.1 22.1

C2 50.0 22.6 27.4

DE 38.4 35.6 26.0

45.9

31.2

22.9

Yes No Not sure





Do you think that your bank should do more to help you manage your credit profile?

46% think their bank should do more to help manage their profile

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

Yes No Not sure

46.0%

26.9% 27.1%

All figures are percentages

Segment % agreeing banks could do more

Male 47.9

Female 44.5

18-24 45.0

25-34 57.1

35-44 52.2

45-54 46.2

55-64 37.8

65+ 34.6

AB 49.4

C1 46.3

C2 53.8

DE 42.6




Credit score

Do you know your credit score?

Some 80% do not know what their credit score is

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


Segment Yes No Not sure

Male 20.3 73.1 6.6

Female 19.9 72.0 8.2

18-24 18.3 70.0 11.7

25-34 27.2 64.4 8.3

35-44 23.4 69.9 6.6

45-54 21.8 71.5 6.7

55-64 14.2 79.4 6.4

65+ 12.4 79.2 8.4

AB 23.8 67.1 9.1

C1 22.1 70.4 7.5

C2 16.0 79.2 4.7

DE 16.6 76.6 6.8

20.0

72.5

7.5

Yes No Not sure




Understanding of credit report

How would you rate your understanding of what a credit report is and what it is used for?

Few people rate their understanding as poor

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


10.5

36.5

42.2

7.9

2.9

Excellent understanding

Good understanding Reasonable understanding

Poor understanding Very poor understanding

Total excellent and good

47.0% Total poor and very poor

10.8%




Length of time information is held

How long do you believe information about you is held on your credit report?

A third are not sure how long information is held

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


1.6 2.1

8.2

22.9

9.0

22.8

33.3

Six months One year Three years Six years Ten years Permanently Don't know




Looking at credit report

When was the last time you looked at your credit report?

25% have looked at their report in the last year

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


2.7 6.5

9.4 5.6

25.3

50.4

In the last week In the last month In the last 6 months In the last year More than a year Never




Looking at credit report

How regularly do you look at your credit report?

Credit reports are looked at relatively infrequently

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

All figures are percentages of those who have looked at their report

4.2

16.0

26.3

29.5

24.0

Very often Quite often Not very often Rarely Have only looked at it once




Understanding credit report

How well did you understand your credit report?

70% understand the figures on their report, but how sure are they of what to do with the information?

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


I understood all of the

information

I understood most of the

information

I understood some of the information

I understood little of the

information

I didn’t understand any of

the information

Don’t know or can’t

remember

28.7% 41.2% 18.2% 5.5% 0.6% 5.9%




Guidance and errors

Did the credit report provider give you practical guidance about your credit score?

Most said advice was not provided or were unsure

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4


28.1 31.1

40.8

Yes No Not sure

Would you know what to do if there was an error in the information on your credit report? All figures are percentages of those who have looked at their report

50.1 49.9

Yes No




Credit availability

Nearly 1 in 4 of us are concerned about being able to get credit; this rises to 40% among 25-34 year olds.

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

How concerned are you about being able to get credit? All figures are percentages

Segment Extremely Somewhat Extremely

plus somewhat

A little Not at all

Male 6.8 14.5 21.3 20.1 58.6

Female 7.2 16.7 23.9 18.0 58.2

18-24 1.7 38.3 40.0 30.0 30.0

25-34 13.5 27.4 40.9 20.3 38.8

35-44 7.0 25.9 32.9 20.6 46.5

45-54 8.1 10.2 18.3 23.5 58.1

55-64 3.8 5.4 9.2 14.7 76.1

65+ 1.4 3.9 5.3 14.3 80.3

AB 6.7 19.6 26.3 17.9 55.8

C1 7.9 15.9 23.8 19.1 57.2

C2 7.5 17.0 24.5 31.1 44.3

DE 5.9 12.7 18.6 18.0 63.4

7.0

15.7 18.9

58.3

Extremely Somewhat A little Not at all

Extremely plus Somewhat 22.7%




Credit availability

London, North East and Wales have most concerns over credit

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

How concerned are you about being able to get credit? All figures are percentages

Segment Extremely Somewhat A little Not at all

East Anglia 7.1 18.8 20.0 54.1

East Midlands 2.8 17.2 22.1 57.9

London 11.2 21.1 21.5 46.3

Northern Ireland 9.7 25.8 12.9 51.6

North East 10.5 15.8 25.3 48.4

North West 6.5 12.6 19.1 61.8

Scotland 6.8 13.0 17.3 63.0

South East 7.2 16.2 16.9 59.7

South West 4.7 14.1 16.0 65.3

Wales 10.2 10.2 22.7 56.8

West Midlands 3.1 14.4 17.5 65.0

Yorkshire & Humberside 7.7 14.7 16.8 60.8




Credit availability

In total 15.2% have had difficulty getting some form of credit

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

In the past 2 years, have you had difficulty getting credit for any of the following? All figures are percentages

Area of difficulty %

Taking out a new credit card 5.5

Loan from a bank or building society 3.3

Loan from another lender 2.9

Getting a higher credit limit on an existing credit card or store card 2.5

A mobile phone contract 2.5

Mortgage 2.4

Taking out a new store card 2.1

A finance / hire-purchase style agreement 1.4

Rental agreement on a house 1.4

Car finance 1.0

Car finance 0.9

Other 0.7




Other services

31.9 32.8 - 32.4 36.7 39.8 33.2 32.0 25.5 29.2 - 32.4 38.5 36.1 30.2 25.4

Are there any other services that would be helpful to help you better manage your credit report?

I think all credit and lending companies, including credit card companies, should have, as part

of doing business with a customer, a plan in place to allow

the customer to access their credit report for free.

More advice on how to improve my credit score and

deal with potential issues would be helpful.

I would like to know how the credit score is affected by different things –e.g. how

much does a missed payment affect it?

Some kind of annual review telling you how

your score changed across the year and why

would be good.

The reports could be clearer and

easier to follow, I find them quite

difficult to understand today

Alerts to let you know of any

changes as soon as they happen.




Methodologies and sources

•  Consumer research in this report is based on a survey conducted with a UK nationally representative poll of consumers. 2,002 consumers were interviewed during August 2014 and questioned about credit reports and credit management.

•  Unless otherwise stated, all sources of information are derived from

Conlumino’s own research and should be referenced to Conlumino/Affinion.

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Conlumino

020 7936 6654 [email protected]

7 Carmelite Street, London EC4Y 0BS

Affinion International Ltd

01753 753338 [email protected]

50 Charter Court, Slough, Berkshire, SL1 2EJ

affinion international: credit management research

Economy & Finance

credit reports

customers credit report

customers credit prole

improvetheir credit

current credit score

view information

personal information

lack of understanding