The Financial Conduct Authority has made new proposals to give lenders access to more comprehensive information to support credit decisions.
The FCA aims to plug gaps in borrowers’ credit files and ensure they more accurately reflect people’s financial circumstances.
Credit reporting agencies collect personal financial data, including credit repayment history, to provide lenders with information that helps make lending decisions.
The FCA says that if the information held by credit reference agencies is limited, people could face barriers to accessing credit, or be exposed to increased risks of unaffordable loans, errors or fraud.
The UK’s financial watchdog says its proposals aim to improve the way credit information is shared within the system, benefiting both consumers and businesses.
FCA consumer finance director Alison Walters said: “Access to affordable credit depends on good quality data. It’s essential to helping consumers navigate their financial lives. That’s why we want to ensure everyone’s credit information is as complete and accurate as possible.”
The consultation closes on May 1.
Richard Pinch, senior risk director at Broadstone, added: “Ensuring lenders have access to more complete and consistent credit data is a logical and welcome step, as high-quality information is at the heart of both prudent lending and good consumer outcomes.”
“Requiring businesses to share data with all designated credit reporting agencies should help reduce blind spots in credit files, improve risk assessment and support more accurate pricing and affordability controls.”
“For lenders, however, the proposals will mean reviewing operational processes to ensure they can comply on a consistent basis. There will also be a focus on data quality, as more comprehensive reporting will increase visibility of any gaps or inaccuracies.”
“If implemented effectively, the reforms have the potential to increase access to credit for consumers, especially those whose financial position is not currently fully reflected in their records.”
“Borrowers could benefit from increased competition in private lending markets, which could lead to greater choice and potentially more attractive prices, while strengthening safeguards against over-indebtedness.”
“The consultation will be an important opportunity for companies to consider the practicalities, proportionality and implementation timelines to ensure the new framework delivers the intended benefits across the market.”