Not waving but drowning

Over 8 million people in the UK are unable to pay off debts or household bills according to the National Audit Office’s most recent report. And this worrying statistic has subsequently generated considerable concern and column inches. However, in terms of the problem of financial distress, the millions of people in actual debt are only the tip of the iceberg.

Just this week the FCA published its Financial Lives Survey raising some serious concerns about the number of people in the UK who are not in debt at the moment – but whose finances are so precarious that one minor crisis or unforeseen expenditure could tip them over.

The survey reveals that:

* 3.1 million adults have high-cost loans

* nearly 6 in 10 (57%) of UK adults have no cash savings or savings of less than £5,000

* 7 in 10 (71%) of UK adults have no investments at all

* 31% of adults have no private pension provision

* 44% of UK adults rely or will rely on the state pension for their main source of income in retirement

Push them over the brink into debt

For many of these adults or families the unexpected cost of a boiler breakdown, a car MOT or a funeral would mean taking on more credit to cover the cost and would push them over the brink into debt.

And for some people it’s even more precarious, as a thread on Mumsnet made painfully clear. Responding to a discussion about a statistic that 2 out of 5 people have less than £100 in savings, one respondent said:

“Yep. I am in that statistic. Low paid job and crippling childcare costs. I’ve already had a cry today about my financial situation.”

Desperate times for many people.

So what can we do? We must look deeper than the tip of the iceberg to the people under the water who aren’t waving – but who are drowning.

Create a safer financial world

Our entire business is built on the objective to “create a safer financial world” and one of our key principles is to do this by helping people assess and then control their finances. There are plenty of admirable debt charities doing a tremendous job in the UK, and plenty of lenders looking to support customers too, but in order to help they need information. They need to know exactly what an individual’s income is as well as their essential, committed and discretionary expenditure. And then, armed with this transactional data, they can review arrangements or provide debt advisory support.

Our Affordability Passport uses open banking technology to allow an individual to share their transactional data with lenders or debt advisers, providing them with a real-time profile of their financial position in just a few minutes.

When money is tight or precarious, people need answers and solutions fast to ensure that disaster is averted. And the Affordability Passport allows that journey to be fast and efficient.

At Castlight we often use the image in our branding of a lighthouse casting light into a dark sea. It’s important to us that the light we cast penetrates beneath those icebergs to what lies beneath and helps to rescue the millions of people for whom debt is perilously close.

Give a man a fish

“Give a man a fish and you feed him for a day. Teach him how to fish and you give him an occupation that will feed him for a lifetime.”

 This familiar wisdom is attributed to a Chinese proverb, but it’s also a principle at the heart of many international charities working in the developing world as they empower local people to learn new skills and become self-sufficient.

 And of course, it’s effectively what we do as parents. We nurture our children through education and by example for around 18 years and then we encourage them to fly the nest and go it alone.

 We take exactly the same approach with our clients – although the process is somewhat quicker!

Watch them fly!

Most companies try to hang on to clients for as long as they can. But we do things differently at Castlight. We want them to be able to go solo as soon as possible. We like to nudge them out of the nest and watch them fly!

For us, a successful client relationship is when one of our customers that we have been working closely with for a number of months, doesn’t need us any more.

However, it’s often a bittersweet milestone as we will have spent a lot of time together. We will have co-created systems and solutions, shared ideas and strategies and ultimately built something innovative and uniquely ground-breaking to move their business forward.

 But what we have co-created belongs to the client. It has been uniquely co-crafted for the needs of a single client and designed for self-sufficiency.

Stepping back 

We’ve built in our own obsolescence – once we are confident that everything is working smoothly and that training and support systems are in place, we step back. And our client integrates the new solutions into their business model and runs with it.

We may perhaps hover a little, just to be sure everything is ok. But then, when we see the product or solution we have co-created making a real difference to their business, we let them go.

It’s a whole new customer dynamic in the world of affordability. We are re-shaping the way people do business and our customers tell us they like it. They like the process of co-creation. And they value the environment of trust – the sense that we want to stop the invoices as much as they do.

 However, once a parent, always a parent. Our offspring continue to need us at different stages in life, long after they are 18. And it’s the same with our clients. We hope they will come back to us when they need further support or solutions in the future. And like good parents, we will be there for them.

Use the Castlight brain to stay ahead of the game

The brain makes around 700 new connections each day – every time we do something for the first time or absorb new information, brand new neural pathways are formed. And the more connections we make and continue to use, the more effectively our brain works for us.

At Castlight Financial our data scientists and our customers are making connections between our products all the time. Our developers are making leaps between products, developing syntheses of ideas to create new services to meet the ever changing needs of the financial marketplace. And our clients too, are making connections, moving through one product to another, merging products, asking us to develop new products, bolting on aspects of one product to another.

And as our customers work with our developers and implementation teams, every day we see new connections being made between our customers’ pursuit of excellence and the solutions we can offer. New neural pathways are being formed, our customers’ businesses are being strengthened.

So that’s why I like to use the analogy of Castlight’s product portfolio as a brain – with neural pathways all leading off to different products – but with myriads of connections between them.

Castlight Financial portfolio of digital tools

Digital tools are too often put in a “toolkit” which is a perfectly good analogy for the way digital tools are used in many companies. But for us, I think the toolbox is too static. Once you’ve used a tool you put it back in the box and take another one out. We don’t want our customers to use our tools like that. We believe our customers will benefit if they sometimes use more than one tool at a time, if they adapt the tool as they go along, combine two tools together or get someone to run after them with a new tool that was never even in the box. And we also believe that our tools will make such a difference to our customers’ business that they will never want to put them back in the toolkit.

That’s why using the analogy of a brain to think about Castlight Financial’s portfolio of digital tools works so much better for us.

If we stay with the picture of the brain, our tools are located in different nerve centres of the brain. Some are more right brained products – intuitive, thoughtful and subjective. Products for instance like our Financial IQ, which uses customers’ transactional data to provide advanced insights into spending behaviour and reports its findings as a “persona” with a Financial IQ score and a set of uniquely individual predictive behaviours. It’s a product that understands how people think and behave. Other products are perhaps more left brained – more logical, analytical and objective such as CaaS or Categorisation as a Service. CaaS is the world’s most powerful engine for categorising and interpreting customers’ transactional data, which will, within minutes, take a customer’s raw transactional data, crunch through the numbers and split the raw data into over 180 categories of discretionary and non-discretionary spending. It’s a product where the numbers tell the story.

How it works with our customers

But of course, the right brain works together with the left brain, with neurons jumping synapses, making connections all the time. And this is how it works with our customers too.

A High Street bank, for instance, may be using CastScore to reach out to customers with thin credit files, who are normally excluded from credit, and give them a chance to be fairly assessed. Then together we identify an opportunity to take a slightly different path and use CastScore to help their customers augment a traditional credit score and radically improve it. And then our hypothetical bank may recognise that they can take Castlight’s risk management customer analytics up a gear and go down the path of implementing Castlight’s Financial IQ or test their data in Castlight’s Data Labs using our APIs to review the affordability performance of their portfolio, highlight problem areas and unlock potential for growth.

Constant changes

It’s one of our most important functions as a team to help our customers identify which pathway to go down to secure the best tools to empower them to grow, and to be robust and effective for their customers.

The open banking revolution is taking hold and taking hold fast. And banks and other financial organisations need to be more nimble and innovative than ever before. We must give our customers every opportunity to move agilely in and around our product suite, using the tools that best suit their needs today and exploring those that might suit their needs tomorrow. And back in the Castlight lab we must continue to test the products we believe our customers will need next month.

In the same way that the human brain constantly changes in response to experience, helping us learn and adapt to our environment, Castlight’s products are designed to help our customers adapt to an evolving financial landscape and predict what might be around the corner.

We Must Address Financial Wellness

More than 6 out of 10 senior HR executives in the UK have seen a rise in financial well-being issues affecting employee mental health and work performance, according to a nationwide study by financial solutions company, MetLife UK.

 

And just this week Insider magazine’s Ken Symon highlighted a troubling figure of £51 billion, which according to a Yorkshire Building Society and Salary Finance report, is lost to the UK’s economy each year in productivity and recruitment expenses as financial pressures make employees unable to finish daily tasks and more likely to change jobs.

Financial Wellbeing At Work

These are very concerning statistics but I think what worries me, perhaps even more, is Metlife’s findings, reported by George Elringham on the Insight website, that businesses are concerned they do not understand enough about financial wellbeing, with 66 percent saying there needs to be more clarity on best practice on tackling financial wellbeing at work.

 

Adrian Matthews, Employee Benefits Director, MetLife UK said: ““There is no magic solution to improving financial wellbeing in the workplace….” And I’d agree with him as far as the magic is concerned. There may not be a magic solution but where we differ is that I believe there’s definitely a solution.

The Solution

Castlight’s Affordability Passport is ultimately a financial wellness tool, which can be put directly into the hands of individuals, whether they are employed by companies or working for themselves. Many of our customers use our Affordability Passport to demonstrate their affordability to lenders, but we are increasingly seeing people use its financial wellness functionality to manage and control their day-to-day finances.

 

The Affordability Passport uses open banking technology to access a customer’s transactional information and uses CaaS, a powerful categorisation engine to categorise income and expenditure, across any number of accounts into over 150 categories, summarising income streams, credit commitments, essential costs and discretionary spending. The customer achieves a 3D picture of their finances, including the pressure points, areas of vulnerability and projections of problems before they happen. For one customer, the Affordability Passport may flag up that what is causing severe financial pressure is their car loan repayment plan. For another individual, it may just be that reducing spending on digital subscription packages would provide enough of a financial buffer, to ease the strain.

 

For some of our customers the Affordability Passport journey is reassuring and informative. It’s like a maintenance gym routine, a financial wellness routine that ensures they stay on track.

Life Changing

But for others with debt who are far from financially well it’s more like a brand new gym membership and induction course rolled into one. And it can be life changing because it sets someone back on the right path, by demonstrating to their bank that, whilst the recent financial path might have been rocky, there are patterns of sound financial behaviour that can be worked on and outcomes turned around. At Castlight we call it redemptive technology.

 

It’s not a magic solution. But sometimes, for someone in financial despair, redemptive technology can feel a little like magic.

 

 

The Joy Of Giving

If you’ve given something up for Lent, you’re in the home stretch now and that chocolate Easter egg, glass of wine or can of fizzy stuff is almost within reach. Millions of Christians around the world choose to deny themselves a treat during Lent and use it as a time to remember Christ’s sacrifice. And millions of people with different faiths or no faith equally use Lent to challenge their willpower, lose a few pounds and increasingly – raise money to help better the world around them.

You only have to look at UKFundraising’s website to see the range of creative fundraising campaigns which the UK’s biggest charities have devised in order to tap into this universal spirit of wanting to do something good for others this Easter.

Sense of Happiness

And giving makes us feel good – that’s a fact. At least according to results of research published recently by O’Brien and Kassirer in Psychology Today which showed that a group of people given $5 to spend on the same treat for themselves each day for 5 days, recorded a lower sense of happiness at the end of the study that the group who were tasked to spend their $5 each day on other people.

But what if you don’t have a spare fiver? What if you are up to the wire, the cheese wire even, at the end of every month? Does that disenfranchise you from the happiness of giving? I think it does.

Financial Health

Digital journalist Jack Derwin recently wrote a helpful article for the Australian edition of Your Money in which he listed 5 signs of financial health, all of which I’d wholeheartedly endorse. https://bit.ly/2UtmEWt

But the one that really caught my attention was the fifth point where he says “the final sign of financial wellbeing is having the ability to give to others. Whether it’s supporting your favourite charity, giving to a worthy cause or helping out a friend in need, the capacity to give is a mark of true financial freedom.”

Financial Wellness

Financial wellness is not just about getting the numbers to line up on the right side in your bank account – although it is certainly about that. It’s also about holistic wellness – getting someone into a position where they are in control of their finances and therefore in control of their lives.

That’s what our Affordability Passport is all about. We use state of the art open banking technology and the world’s fastest categorisation engine to do it, but what I love is that one of the things we can achieve for our customers is one of the world’s simplest and most ancient of pleasures. The joy of giving.

 

Wishing You a Happy and Affordable Christmas

Every year statistics are published highlighting how badly we get ourselves into debt over Christmas and how long it takes us to recover. The numbers aren’t out yet as there’s more damage still to be done online and in the High Street. There’s still more plastic to smoulder.

But what I’ve found this year, in the run up to Christmas, are lots of websites suggesting innovative (and sometimes glaringly obvious) ways to save money at Christmas. I like the idea of stuffing a big cardboard box full of balloons for a toddler or concocting homemade bottles of rosemary infused olive oil for adults. There seems to be a whiff of nostalgia floating around the internet, a retro yearning for simpler times and maybe even a game of charades?

Pressure to Overspend

And it’s all good. We all need to resist the pressure to overspend on presents and then buy Christmas themed things we don’t need. Like a Christmas jumper. Who started that? And why have I got one?

But in amongst the thousands of words on line about the damaging effects of overspending and the creative ideas for keeping things simple, it was the voice of Lucy on Mumsnet that made me think.

“Unfortunately this month we don’t seem to have much money spare. I had put some money aside but due to an issue with my car that’s all gone.


 There is 9 people in total to buy for.


I’m spending roughly £20 – £30 per person but it will mean I have to use my credit card. I’m so careful with money normally and try to never use my credit card so I just feel like there’s a massive weight on my mind.”

Financial Blip 

Lucy hadn’t overspent this month. She’s careful with her money and she had specifically saved for Christmas. But her car broke down and her budget unravelled. Lucy is not alone – she speaks for thousands of families across the UK, who are just one financial blip away from debt.

These are the people for whom many of Castlight Financial’s products have been developed and which are now being widely used by some of the UK’s biggest banks. CaaS (Categorisation as a Service), CastScore and the Affordability Passport are all designed, in their different ways, to help banks and other financial institutions support customers who might experience a bump in the road. They provide lenders with unprecedented levels of information and insights into a customer’s finances, so that they are able to get a 3D picture of a person, their life, their financial behaviours and spending patterns and support them through difficult times of the year, like Christmas.

Thank You

I hope Lucy has a bank account with HSBC or one of the other financial institutions who use our affordability tools. Because if she does, she won’t need to tell them that she’s normally so careful with money. They will already know that. And that ability to really know  their customer means much greater financial security for Lucy, not just in December but all the way through the year.

We are proud of our affordability products and the positive impact they have had on thousands of people’s lives this year. I am confident that next year we will make even more progress. And my dream is that no-one will post messages of financial desperation on Mumsnet ever again.

Happy Christmas to everyone who has shared this blog year with me – thank you for your interest and support.

And for those of you I might see over Christmas, I hope you like your olive oil infused with rosemary?

Daredevil Plot Turns on CastScore

DAREDEVIL SEASON 3 SPOILER ALERT

As season three of Daredevil explodes onto Netflix and sucks us all into the now familiar Marvel drama fest of nocturnal super-hero action, fight scenes, intrigue and love interest, I have to say I have been side-tracked a little by the brand new character of FBI Special Agent Ray Nadeem.

When we first meet Ray at his son Sammy’s birthday party, we find out the Nadeem family are in the midst of a family financial crisis. His wife Seema has had all her credit cards declined. Ray’s brother’s wife has cancer and their insurance has stopped paying for treatment. Ray and Seema have stepped in and helped cover their sister-in-law’s medical expenses. And now they are in debt.

Overwhelmed by the financial pressure, Ray asks for a raise at work and is denied. His boss tells him his low FICO score has put him out of consideration for promotion as he poses a bribery risk.

Instead, the agent is assigned the task of visiting arch villain Wilson Fisk in prison to elicit co-operation with ongoing investigations. Needless to say, it looks like Ray’s course is set on a slippery slope into well … bribery and corruption.

Not being a character in the original Marvel universe, purists may not embrace Agent Ray Nadeem as quickly as I have. But I have to confess to an ulterior motive. I’m drawn to Ray because he’s a character in the everyday universe of the world I live in too.

Financially Overstretched

He’s financially overstretched himself but he has done so with the very best of intentions. All he needed was a timely promotion, a window of time to pay off his debt, his sister in law to respond to treatment and all would have been well with his world. He would have had a routine visit to Fisk in prison and returned to his desk for a sandwich. Admittedly, this would be seriously bad TV, but in the real world, personal disaster would have been averted.

The plot all turned on a FICO score which just showed Agent Ray was in debt, not why or how likely he was to be able to repay it.

It was for people like Ray that Castlight recently launched the world’s first open-banking affordability score, providing people with a whole new way of demonstrating their creditworthiness.

Traditional credit scoring focuses on the consumer’s future credit behaviour being similar to their past performance.

CastScore, by contrast uses open-banking technology to analyse a customer’s transactional data in real time and score their likelihood of paying credit back. The AI that powers the CastScore technology has been validated on actual loan performance data, supplemented by expert analysis of spending trends with high street banks. CastScore then merges this information with transaction analytics, sourced from an up-to-the-minute review of the customer’s actual income and spend as well as a more complex analysis of lifestyle and discretionary spending.

“Redemptive” Technology

CastScore looks at and categorises every debit and credit, filling in the gaps in traditional credit data reporting and provides a 3D movie of an individual’s financial story. It gives people a chance to be fairly assessed. And it is a “redemptive” technology which allows people to make mistakes, recover from them and get back on track.

If CastScore had been checked with Agent Ray Nadeem’s FICO score, it would have shown that Ray had a good regular job, that he had a history of fulfilling credit commitments and that he had hit a blip. It would run Ray’s transactional data through financial insights and behaviour software and provide a lender with a score which reflected Ray’s 3D financial profile and the statistical likelihood of him being able to pay off his debts.

It could very easily have given him a score that would have reassured his boss, secured him the promotion and changed the world of Marvel forever.

World’s First Open Banking Affordability Score Launched By Castlight Financial

Affordability innovator Castlight Financial has developed a new open-banking affordability score, providing access to borrowing for the first time for the 5.8 million people, in the UK alone, with “thin credit files”.

The company, which has been pioneering open banking based affordability products for the last three years, including the Affordability Passport and Categorisation as a Service (CaaS), has now taken the open banking technology currently being used for traditional credit assessment and unlocked a powerhouse of additional functionality.

Revolution

The new affordability score, CastScore, is not dependent on a customer having a history of credit in order to demonstrate creditworthiness and instead uses open banking technology to analyse a customer’s transactional data in real time and score their likelihood of paying credit back.

The AI that powers the CastScore technology has been validated on actual loan performance data, supplemented by expert analysis of spending trends, with high street banks. CastScore then merges this information with transaction analytics, sourced from an up-to-the-minute review of the customer’s actual income and spend as well as a more complex analysis of lifestyle and discretionary spending.

CastScore is currently being piloted by three of the UK’s High Street banks.

Says Phil Grady, CEO of Castlight Financial: “CastScore looks at and categorises every debit and credit and so it allows us to fill in the gaps in traditional credit data reporting and give customers, particularly those with thin files, a chance to be fairly assessed. Traditional credit scoring focuses on the consumer’s future credit behaviour being similar to their past performance through looking at historic credit reference agency data. The CastScore creates an up to date view of a consumer’s available disposable income and is able to predict future payment performance using more recent and relevant data. It truly represents a revolution in how lenders may view all consumers, from those with established credit profiles to those with thin files.

For the first time someone with a thin credit file will be able to demonstrate, at the touch of a button, not only that they have a regular income coming in, and that they are financially robust, but they will be able to show a set of exemplary financial behaviours which make them a very good credit risk indeed. For a financially cautious millennial with little credit history but enough money in the bank, CastScore could be the difference between securing a mortgage or being stuck in the generation rent trap.”

But it’s not only the millions of people with little or no credit footprints who will potentially benefit from the CastScore technology. A predictive CastScore, even somewhere in the middle of the range, could be used to augment a traditional credit score and radically improve it.

Says Grady: “The reason that a CastScore rating, taken by a lender in conjunction with a traditional credit score can improve a customer’s credit score is because CastScore isn’t just reviewing a history of credit repayment performance. It is instead based instead on an individual’s nuanced behaviours. The open banking technology scans all the customer’s transactional information and assesses whether the customer is a saver or a spender, do they run a tight ship or exceed their means and even are they a homebody or a party animal. It will also raise good and bad financial behaviour flags. A good flag might be that discretionary spending on charitable giving and personal health has increased. A bad flag might be unpaid bills, bank charges, increased gambling or payday loans.”

Machine Learning Powerhouse

Castlight’s machine learning powerhouse merges both the transactional analytics and the customer’s financial “story” into the CastScore which gives lenders all the enhanced predictive information they need to make a lending decision for customers with thin or no credit files. And for customers with traditional credit files, it significantly augments their financial profile, providing all parties involved with more insight, less risk and more lending scope.

An example of CastScore’s insight might be a customer who takes out a finance plan for a new car in January. This commitment may appear on a traditional credit score a few months later, if the credit score has good coverage, and only then will the credit score be updated. However, the CastScore score will update as soon as payments start being made from the account, providing financial decision makers with up to the minute information.

CastScore assesses a customer’s full financial big picture. So, whilst the new car payments may be greater than the customer’s previous car payments, there may be reductions in insurance premiums. The customer may also have taken out roadside assistance, which is statistically a good indicator. By taking factors like this into account CastScore could demonstrate that the new car was a sensible investment that in the long run cuts costs and increases financial stability.

CastScore’s algorithms have been uniquely trained to analyse the hard numbers but also to reach out into the complexity of a customer’s real life and set credit and income movement in context. CastScore’s AI brain has the computing power to demonstrate that, in a particular case, a new car may not just be an item to put on a list of credit obligations, it could be a sensible investment that in the long run creates stability in the family life and cuts costs. Ultimately that means that when the entire credit scenario is computed, it will actually factor positively in the generation of a good CastScore.

3D movie

As CastScore is being piloted with the UK’s banks as a means of enfranchising customers or helping them augment their credit scores, Castlight Financial is already developing CastScore to provide the banks themselves with significant competitive edge in a busy market place.

Says Grady: “If traditional credit scoring provides a snapshot of a customer’s affordability, CastScore provides a 3D movie. That means that any bank offering CastScore to customers is going to be able to use the enhanced modelling system to identify risk more accurately and ultimately offer better credit terms. Credit risk teams will also be able to use CastScore  for ongoing control and monitoring of customers’ finances, providing an early warning system of potential problems and allowing them to update their risk models and limits if needed.

“Open banking has already revolutionised the way we think and bank. But it’s a massive iceberg, with a huge percentage of its capability still to be exposed and exploited. By harnessing the full potential of open banking, we are powering a potential revolution in credit scoring and the wider world of banking. I believe the CastScore can help both lenders and customers access better, safer credit as well as enfranchising the millions of people with thin credit.”

False Eyelashes And Succumbing To Influence

by Danielle Flynn, Castlight Marketing Manager

More than one in five 25-35 year olds spend more than 60% of their income on the very day it enters their account and 3% of these millennials even find themselves in the red by the end of payday, according to a survey by KPMG and reported in insider.co.uk. KPMG’s survey went on to show that the 42% listed unsecured loans and credit card payments as a significant payday outgoing.

Another article, by Shawn M Carter published on the US site CNBC, examined social media’s impact on American spending habits and found that 90% of millennial respondents say social media creates a tendency to compare their own wealth or lifestyle with those of their peers. And that 57% of the millennials surveyed reported feeling “inadequate” about their own life and then went on to part with money they hadn’t planned to spend.

With big brands investing increasingly bigger chunks of their marketing budget on “influencers”, across various social media platforms, millennials are being bombarded not only with images of their peers’ holidays, handbags and harissa chicken but also a stream of images of social media influencers living the dream.

Top influencer Huda Kattan is a make-up artist and beauty blogger with 24.3 million followers on Instagram and 2.2 million subscribers on YouTube. And when Kim Kardashian wore Kattan’s branded false eyelashes, so did thousands of her followers. Kattan’s currency soared and her spot at the top of the influencers’ charts confirmed.

As a millennial, it’s clear that we are exposed in subtle ways to the influencers’ machine and to a relentless pressure to spend. There’s also a sense that spending beyond one’s means has perhaps become normalised, in a way which it wasn’t in previous generations.

At Castlight Financial we are known for our Affordability Passport which uses open banking to look at a customer’s bank transactions, categorise them into 155 categories of spending and 29 categories of income and provide a definitive analysis of exactly how much a person can afford to borrow and repay. The Affordability Passport is primarily used for people looking to secure a mortgage or a loan and can allow brokers and lenders to provide a report and an answer in under 10 minutes. However, the powerful categorisation technology that powers the Affordability Passport, can also be used to help people improve their money management skills – or Financial IQ.

Our data scientists are currently fine-tuning our software so that millennials, and other generations too, will soon be able to run their transactions through our software, see exactly where they are spending their money and whether they demonstrate a high or low Financial IQ. And if it’s a low Financial IQ, what they can do to improve it.

Watch this space as I believe that, before we know it, social media influencers are going to have a lot less influence. As we all take on board the tools that will help us increase our Financial IQ, we will be more aware of what we are spending and why. We will be able to take back control of our bank accounts and stay safely in the black way beyond payday.

Just because Kim Kardashian wore Huda Kattan’s lashes that doesn’t mean we all have to!

Time For A Financial Fire Drill

A law has just come into effect in the States which allows American consumers to freeze and unfreeze their credit without paying a fee. Signed in May by Donald Trump, the Economic Growth, Regulatory Relief and Consumer Protection Act amongst other things, abolishes the not inconsiderable fees which were previously associated with freezing and unfreezing credit.

Will they do it? I’m not so sure given that, according to various surveys, only 8% to 20% of customers have enacted one in the last 12 months.

Surprising maybe, but what I found even more surprising is that whilst freezing credit is a key tool for consumers to use to safeguard their identity, it is not widely understood.

I was talking about this with friends this week. Friends who are professional people but not financial professionals. Their assumption was that a credit freeze was a freeze on the use of their credit cards.

Why would they not? It’s not exactly crystal clear is it? And they’re not alone. Researchers at the University of Michigan School of Information in Ann Arbor, also found plenty of consumers who thought that a credit freeze stops them from using their own credit cards, rather than restricting access to their credit files and stopping crooks opening credit reports in their name.

So with an apparent level of inertia in the States on credit freezing and unfreezing and a lack of understanding of the process here in the UK, it’s maybe a good time to consider our options. Time for a bit of a financial fire drill.

Putting your credit on ice, freezing it so that no-one can open an account in your name is one way to safeguard against identity theft but what else can we do as consumers to protect our credit and identity?

Lauren Lyons Cole of Business Insider compiled a thorough checklist earlier this year. And I couldn’t agree more with her recommendations. I believe now is a good time to give them another airing.

  • Monitor your current accounts daily or weekly. Use an account-aggregation app like Mint or log into your various accounts to make sure all charges were made by you. If you see something suspicious, contact your bank immediately.
  • File your taxes early. The IRS is cracking down on tax fraud, but there could be an uptick after the Equifax breach. Get your tax information organized early, and submit your return as soon as you receive your W-2 and 1099 forms. Added benefit: If you’re due a refund, you’ll get it sooner, and if you owe taxes, the amount isn’t due until April 15 regardless of when you submit your return.
  • Use secure passwords and two-step verification. Because most identity theft occurs with existing accounts, one of the best things you can do is safeguard your data online, especially for accounts that contain identifying information and credit-card or other financial data.
  • Set up alerts for new credit activity. Save yourself money and use a free credit-monitoring service, like Credit Karma or Credit Sesame. You can also set up a fraud alert or credit freeze if you’d like.
  • Check your credit reports regularly. You can access one free copy of your credit report from each of the three bureaus once a year through the government-sponsored AnnualCreditReport.com. Set a calendar alert to remind yourself to do this every year, or pull one report every four months to be extra vigilant. While you’re at it, there may be things you can do to improve your credit score, fix any errors on your credit report, and optimize your collection of credit cards.
  • Choose identity-verification questions and answers carefully. Additional identity-verification questions can help keep accounts secure, but not if you choose questions like “What street did you live on when you were growing up?” or “Where were you born?” that could easily be answered with access to your social-media account or other personal information.