By Trevor Clawson.
According to the Financial Conduct Authority, around 24% of us have little or no confidence in the way we manage money. Perhaps that’s not surprising. In the course of a single day, the average person might spend cash in a cafe, buy online with a credit card and make a supermarket purchasing using a contactless credit card. Meanwhile, somewhere in the background, direct debits are paying utility bills, making loan repayments and renewing subscriptions. It’s hard to keep track – not least because the transaction details are spread across multiple accounts.
Seeking to address that problem, London-based Fintech company, Clearscore has announced the launch of a personal financial management tool – dubbed OneScore – that will combine the information used to compile credit scores, with bank account activity data. According to Clearscore, the new service will transform the way that consumers understand and take control of their financial well-being by bringing together historical and real-time information.
Starting with the Credit Score
Established in 2014, ClearScore is best known as a provider of free credit score reports and, to date, it has attracted seven million users. According to the company’s own figures, around 2.4 million of those have successfully used their personal credit reports to put themselves in a better position not only to access credit but also secure the best possible terms.
Credit reports draw on a broad range of information – most of it relating to the borrowing history of the consumer. Thus, the credit report will be based not only on the products taken out but also on how well the debt has been managed. Late or missed payments, defaults and even whether or not a credit card bill is paid off in full at the end of every month all go down on the report. Looking beyond the banking and financial services sector, the report may also track utility bill payments. Once compiled, all this data is used to create a credit score – effectively a number that indicates whether a potential borrower is likely to be a good risk.
And increasingly we are all being encouraged to get know our ‘data selves’ – or to put it another way, if credit scores are important decision tools for lenders, consumers benefit from knowing the factors that are feeding into their own ratings. As Craig Rutherford, Managing Director of UK Car Finance puts it:
“With the number of people seeking loans increasing year on year, your credit profile is an extremely important part of knowing where your finances are. As credit scores are a huge indicator for lenders, knowing how yours stacks up and what you can do to improve it is incredibly beneficial to the user. “
Not The Whole Picture
But it’s not the whole picture. According to Justin Basini, CEO and co-founder of ClearScore, a credit report alone does not provide a comprehensive snapshot of an individual’s financial health.
“Credit scores are really useful but only reflect a small part of your financial life. Our ambition has always been to go so much further. OneScore brings together your financial past and present in one place to give you the opportunity to create a better financial future,” he says.
In practice, that means that Clearscore is taking a step beyond the provision of historical credit score data alone. Those who use OneScore will also see how their day-to-day and month-to-month spending, saving and income patterns are affecting their financial health.
This is possible because Clearscore is the latest fintech provider to secure a licence to access bank account data under the UK’s newly-minted Open Banking regulations. Under Open Banking, Britain’s nine largest banks and one building society are required to grant suitably validated financial services companies access to current account information. This data is shared in real time through a secure software platform. This is allowing companies like Clearscore to collate information from bank accounts ( with the customer’s consent) and create up-to-the-minute financial reports. In the case of OneScore, users are not only being offered an analysis of how they manage money but a score, numbered from 0 to 1,000, covering different aspects of their financial life.”
“This will be transformative for millions of people – helping them gain control of their money and access credit products more cost-effectively,” said Basini.
The question is perhaps, will consumers pay any real attention to the scores that are presented to them via the tool? Or to put it another way – a score of close to zero might come as something of a shock but will a poor reading have any impact on individual behaviour?
Clearscore stresses that is also offering help in the shape of personalised online financial coaching, designed to help them hit their financial goals. In addition, advice on the best value products – such as mortgages – will also be provided.
If numbers on a screen don’t mean much to you, Clearscore has chosen a graphic approach to presenting the information, with financial health represented as petals on a flower.
“People like tracking, but don’t like most trackers,” said Basini. That’s why we’ve applied our fanatical focus on design and user experience to create the most engaging view of your finances ever. Months of testing, with hundreds of users, has produced an easier, calmer, more beautiful experience, unlike anything anyone has ever used before. The more engaged users are, the more likely they are to learn more about their finances, the more in control they feel, the better the decisions they can make.”
Arguably anything that encourages consumers to look a bit more closely at their finances can only be a good thing. The Financial Conduct Authority has warned that more than 50% of Britons are in a situation that could be characterised as ‘financially vulnerable’ and more than 30% have been turned down for financial products because of a poor credit score. ClearScore’s new tool is one of a wave of financial management tools that help individuals to make changes to the way they organise their finances. These include HSBC’s Connected Money and smart money app, Yolt. By factoring in credit report information with bank account data, ClearScore hopes to attract users by drawing on the deepest possible well of data.