Salad Money Credit Where Its Due Report WEB SINGLES - Flipbook - Page 11
WHAT NEXT?
This retrospective analysis, comparing data from
one of the UK’s largest Credit Reference Agencies
(CRAs) with Salad applicants and customers,
demonstrates:
• The enormous power within Open
Banking data to give accurate
insights into applicants’ financial
wellbeing, propensity to pay, and
affordability for credit – with many
of these insights completely missed
by the binary or imperfect nature of
traditional credit scoring.
• Credit reference agency data
can be out-of-date or contain
negative data which acts like a
millstone around customers’
necks, restricting their access to
affordable credit.
• This is especially true for Salad
customers, 88% of whom already
have some form of impaired credit
histories.
• The CRA model does not work for
customers in our sector and leads
to a restriction in accessible and
affordable credit.
11
Credit scores (and CRAs’ operating
models) serve prime and near
prime consumers well, enabling
competition and choice in
consumer credit markets. But they
do not improve the ability for firms
to provide affordable loans
to under-served customers. They
can be harmful to financially
vulnerable customers and even
disadvantage the social purpose
and not-for-profit lenders which
seek to help them.
Alongside other social purpose
lenders we have already engaged
with the FCA to call for appropriate
changes11 within the credit
information market and among
existing CRAs, which would catalyse
better outcomes for consumers.
We need:
• Consideration of the ‘Social
Credit Score’ concept championed
by a group of CDFIs.
• Clear regulatory or governmental
intervention to drive change.
• The widespread adoption of
insights unlocked through Open
Banking into CRA scoring.
• New CRAs which focus on
supporting the financially
vulnerable.
A fit-for-purpose credit information
market should represent all
consumers, including those financially
under-served, vulnerable or with low
financial resilience.
Salad Projects, Responsible Finance and a group of CDFIs, April 2023
Comparing the value of Credit Reference Agency data with Open Banking when serving financially excluded people
11
