Banks are desperately trying to weed out bad debts and as a result some borrowers are facing the prospect of having to repay their debts early and suffer pre-emptive cuts in their borrowing.

It has become increasingly apparent in recent months that banks have become extremely wary of bad debt and in response to this fear, Experian, the credit reference agency, has decided to launch a new service.

The new service for banks which is called Risk Triggers will alert lenders if a customer starts to show signs that they are struggling to repay their credit card and personal loan debt.

Banks are then able to use this information to target struggling customers, in ways such as requiring them to repay their loans more quickly so that lenders are able to fully recoup their loan before the customer becomes unable to repay it.

While banks are already able to access customers’ credit files, this new service will send extra information to lenders of instances such as where a customer misses a repayment for a second time or if they were to exceed their credit limit.

Other ‘triggers’ Experian will be watching out for include if a customer makes a large number of credit applications, such as for debt consolidation, in a very short period, this could be treated as a potential sign that the customer is struggling to meet repayments.

Daily alerts will be sent out to lenders as the previous practice of sending reports weekly or monthly has often meant that it is too late for a lender to act on the information provided.

For many customers this will come as bad news. If they are beginning to struggle, many would prefer sympathy, rather than an attempt to claw back repayments before they are overdue. These customers could be relieved to find that payday loans do not require a credit search and therefore give a ‘breather’ to a client temporarily short of funds.