Creditors shift gaze to low-risk clients
Lenders are adapting to changing economic conditions and have moved their strategies away from riskier customers
You’d be wise to ensure you have a good credit score and that credit providers view you as low risk if you want any chance of being approved for a credit card or personal loan.
Carmen Williams, director of research and consulting for TransUnion Africa, says lenders are adapting to changing economic conditions and have shifted their strategies to focus on lower-risk customers over the past year.
The latest TransUnion SA industry insights report has found that overall the number of credit cards issued decreased 15% and bank-issued personal loans fell 0.5% year on year.
Yet the percentage of credit cards issued to borrowers increased from 87% to 94% and the share of new bank loans to low-risk borrowers went up from 62% to 67%.
Low-risk borrowers are consumers with a credit score of more than 730, as measured by the TransUnion internal risk score. The report compared the number of new credit cards and personal loans issued in the fourth quarter of 2018 with the fourth quarter of 2017.
The report also measured delinquency rates (where borrowers are three or more months in arrears with their repayments) and found that fewer credit-card holders were delinquent but more home-loan borrowers, vehicle-loan customers and bank personal-loan holders were delinquent over the measurement period.
“This increase in missed payments could be an indication that economic challenges have taken their toll on consumers and may have compromised their ability to meet financial obligations,” Williams says.
To monitor your credit scores and protect yourself against identity theft, all credit bureaus offer you one free credit report each year. In addition, TransUnion allows you to actively monitor your credit reports on an ongoing basis, as well as protect yourself against ID theft, for a fee (R99 a month).