Overcoming Our Greatest Credit Cycle Challenges In A Post Covid World

By Melanie Cochrane

Post Covid, we live in a different world. The credit cycle has changed, and cyber and data breaches have brought credit, fraud and identity monitoring into the spotlight.

Under these circumstances, the need to ensure greater financial inclusion for the Australian population is more vital than ever

The financial inclusion challenge

In 2022, there are 2.5 million Australians with limited or no information on their credit files. It includes young people, members of the indigenous community, those new to the country, re-entering the credit market and small business owners.

Lenders traditionally rely on credit reports and scores as part of the process of assessing a loan – but what happens to these 2.5M Australians on the fringes of the mainstream financial system with limited or no credit history? Without new insight this group is potentially excluded from the market.

That’s where Equifax has a leading role to play, and a big part of this role is innovating for alternate data.

By using alternate data sources, Equifax can help enable an additional 4 - 12% of consumers with limited credit history to be included in the credit market and reach their financial goals.

So, what does this look like in practice? This journey started for us a couple of years ago when we began to evolve our scores and insights, creating the Equifax ‘One Score’ to help lenders say yes to more people.

Late last year, with the help of our colleagues in the UK, our team started bringing together bank transaction data (BTD) and traditional bureau data to create a Financial Health Index, which can help lenders better predict risk where traditional credit information is not available or where decisions seem to sit on the fence.

And in mid 2023, we will launch a financial literacy portal (Credit Fit), to give more consumers the tools they need to access, understand and take control of their credit profile - all of which can be accessed through banking or financial ap

Upskilling all Australians

At Equifax, we support consumers when seeking credit at pivotal moments such as applying for a mortgage, financing education, or buying a car.

Recently, however, it has become clear that many Australians are not familiar with credit reporting, or how their credit score can help - or hinder - them at these important life moments.

We want to help consumers live their financial best, by giving them the knowledge and skills to take control of their credit scores, gain access to credit, and help them protect themselves from identity theft and fraud.?

One way we are doing this is by finding innovative ways to help young Australians who aspire to the major financial milestone of purchasing their own home. We’re completely changing how employment income is verified, providing a secure, digital alternative helping employees, employers and third parties mitigate the risk when verifying employment income through our Verification Exchange.

We’re also supporting these consumers throughout their home buying journey, not just during the initial financial stages. To do this, we are looking to expand the iCIRT builders’ ratings beyond NSW. This will help more consumers make better decisions about who to buy property from and invest their life savings with. The goal is to build transparency and trust in the industry, thereby giving consumers confidence that they are dealing with reputable developers or builders.

At Equifax, we are committed to being part of the solution, empowering financial inclusion and freedom through education, policy change and customer advocacy. By taking a holistic approach that incorporates data security, fraud and identity and credit reporting, we can support those that are vulnerable and deliver education to consumers at every stage of the credit lifecycle, creating a society where everyone is able to live their financial best.