In a recent Canada Financial Literacy survey conducted by LowestRates.ca, 52% of Canadian participants said they were unaware that applying for a credit card could negatively affect their credit score. Nearly six in ten failed the survey’s test on basic financial literacy—a finding that’s disconcerting enough, but even more so in light of the fact that 78% of participants rated themselves as financially literate (‘good’ or ‘excellent’).
Where some might see shocking statistics, smart lenders see an opportunity to step in and educate consumers on matters that affect their personal credit scores. With the right credit information at their disposal, consumers are empowered to make informed decisions about their financial futures. By providing this information to consumers, lenders can benefit, too.
Realistic expectations create a better customer experience
One of the biggest problems with misinformed consumers is the shock they get when the credit score they have in mind doesn’t match the one determined by a lender. There are numerous free online resources for interpreting one’s credit standing and obtaining a credit score. However, these providers are not regulated and may not be in a position to infer an individual’s credit situation. Canada’s two credit bureaus offer multiple credit scores, and most lenders also use internal scores to determine creditworthiness.
Not only does this confuse consumers with too much clutter, it also strengthens the misconceptions they have about their credit scores. Lenders then have to deal with the consequences of a subpar customer experience—consumers who apply for a loan with confidence, but are surprised or even angry when the loan is declined.
Having a complete and realistic view of their credit file helps consumers to be proactive in reconciling any discrepancies they may identify, and noting and addressing any potential issues with their credit scores. This not only saves time on the lender’s side but also leads to meaningful dialogue with informed consumers who want to understand their credit score. This in turn helps lenders to be proactive in offering relevant services and products to their customers on terms that benefit both parties.
Informed consumers are potential customers
People don’t know what they don’t know. If a consumer is unaware of their real credit score or the credit opportunities available to them, they are less likely to look for service or assistance from lending institutions. As a lender, you can take a proactive approach to addressing this knowledge gap by providing consumers with a reliable financial literacy tool.
Consumers who have a good understanding of their credit files can use this information to reach their financial goals. They can actively seek opportunities from lenders, because they know how their decisions may impact their credit record.
Greater financial literacy means better customer engagement
Over the past year-and-a-half, the availability of credit profile information and credit ratings has become a non-negotiable part of consumer interaction. Consumers expect lenders to do more than simply provide them with this information. They also want to know how this can help them make better financial decisions.
A digital financial literacy tool that provides accurate, reliable and vetted credit information can help lenders to drive consumer engagement, improve customer attraction and retention rates, and differentiate themselves in a rapidly changing landscape.
With TransUnion’s CreditView, lenders can give consumers access to a single source of information on their credit profiles, putting them in control of their credit decisions in a meaningful way. For example, the industry-first Score Simulator demonstrates how certain decisions can affect their credit scores—no theory, no online quizzes, just reliable and personalized data that creates a real-world view of a consumer’s credit score.
Empowering consumers to take control of their financial future and helping to create a better lending ecosystem: this is what we call Information for Good.
For more information on CreditView, please visit transunion.ca/product/creditview