RBS and Monzo Offering Free Credit Score Checking Facility To Customers
28 Feb 2020
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- Customers who maintain accounts with RBS and Monzo are going to have the ability to check their credit scores without any cost through their apps.
- Monzo will also offer free advice to customers on steps they can take to improve their credit score.
- Having access to free credit score checks will help customers save during the credit application process.
RBS made the service available to customers this week, while NatWest, a sister concern of RBS, is expected to release the feature on the 10th of March. As for Monzo’s customers, they will have access to the free credit check facility sometime within the next few weeks.
Having the ability to check credit scores before applying for a credit product makes it easier for customers to assess their chances of getting their credit request approved by a lender.
The practice of checking credit scores before applying for a credit product, such as a credit card or a mortgage, is not very common in the UK. According to data reported by Experian, about 55% of Britons apply for a credit product without checking their credit score beforehand. This exposes them to the risk of either having their application rejected, or being offered rates that are higher than what they can afford.
Credit scores are inversely proportional to interest rates applied to credit products. According to a research study conducted by Moneycomms in 2019, a bad credit score can mean a monthly mortgage that is £262 higher compared to the payment required by someone with a good credit score. This can amount to a massive £78,531 that those with a bad credit rating would pay over a mortgage loan that spans 25 years.
The features expected to be introduced by Monzo will also offer credit score analysis to customers, including changes that have occurred in their credit score every month, and tips on improving this score moving forward. For example, if the app recognizes that a customer is no registered to vote, it will notify them to do so as that will improve their credit score.
According to a blog post written by Monzo, the company will address customer concerns that have highlighted a lack of understanding when it comes to the impact credit scores can have on their personal finances, or how they are calculated. Monzo hopes to offer more information pertaining to credit scores through the app.
Experts believe that the new feature being launched by Monzo indicates that the digital bank could be expanding into other credit products in the near future, possibly offering money management services.
Such expansion would be fitting to Monzo’s recent moves. In August 2019, the company started offering a variety of personal loans
with amounts between £200-£15,000 at a rate of as low as 3.7%. This move followed a failed attempt made earlier by the company to offer loans to the public, which is estimated to have caused a loss of around £3.1 million to the firm, and resulted in overdrafts amounting to £19.2 million.
Overdraft fees are also being revised
in April, and Monzo’s customers with good credit scores are expected to pay a variable EAR of 19% on their overdraft balances, while those with a poor credit rating could end up paying a rate between 29%-39%.
Offering a free credit check will help customers save money. Credit reference agencies like Equifax require customers to pay £7.95 per month for accessing their credit score, while Experian and TransUnion are charging as high as £14.99 per month for the same.
Both RBS and Monzo will be using data provided by TransUnion. The partnership would help TransUnion, a credit reference agency, gain access to more data pertaining to consumer finances, and this could enable the agency to deliver better services.
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