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CCJs still key indicator of higher lending risk

In the era of data sharing and credit scoring, County Court Judgment (CCJ) listings on a credit file are still key indicators of high risk for lenders, according to research.

Industry consultant and 'Good Judgments' report writer Peter Welch said one of the biggest surprises to emerge from his research was the prominence of CCJs in credit risk analysis.

"I was expecting a more nuanced message, but despite all the other data, judgement records continue to be a key piece of data which lenders take extremely seriously indeed," said Welch.

Judgment information is particularly important to lenders when assessing those with 'thin' credit files, for example younger or financially excluded applicants, according to the research, as lenders generally become more risk averse.

"The impact of the credit crunch is that lenders are more focused on identifying applications that represent a higher risk, therefore any indicator is likely to become more valuable," said Welch.

According to the research, lenders are still reluctant to litigate over debt and continue to see legal action as a last resort. Lenders have been writing off far more debt than they pursued through the courts between 2005-6, but judgment registrations rose in the third quarter of 2008 as the credit crunch took hold.

Meanwhile, a new website called Trust Online has been launched offering consumers, lenders and small businesses access to millions of judgment listings in Britain and Ireland.

The database of information held by the Registry Trust details the amount and date of any judgment, the court where the ruling was made, the case number and whether the judgment has been satisfied.

Single search fees start at £8 and Trust Online suggests consumers might want to search their own records to ensure information - particularly of satisfied CCJs - are up-to-date or check the status of potential tenants or trades people.

Malcolm Hurlston, chairman of Registry Trust, said: "In the current economic climate, lenders will want to lend to people who can repay and few people will want to risk a failed transaction because the other party is in debt and can't finish the job."

Hurlston denied the database was competing with credit reference agencies like Experian and Equifax and added: "The credit reference agencies (CRAs) take data in bulk from Registry Trust Limited to compile credit histories. Members of the public can only access their own statutory or CRA on-line report, but not public information about other people."

For consumers, it might make sense to buy a CRA report at £2.50, but he said www.trustonline.org.uk allowed account-holding organisations to gain bulk access discounts like Derbyshire County Council which already used its trusted trader scheme.

This article was sourced from www.credittoday.co.uk

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