CUSTOMERS WITHDEFAULTS, WITHCCJS, AND WITH NOCREDIT SCORELenders which rely on CRA data wouldtypically view a CCJ or default as a ‘creditimpairment event’ and therefore may declinethe customer’s application.However, the analysis revealed:• The percentages of acceptedand declined customers with aninsolvency or CCJ were identical(35%).• More accepted customers (80%)than declined customers (75%) hadat least one default registered inthe previous six years.• 10-11% of customers do not have acredit score.Having no score may be a fatal policydecline reason for many lenders thatrely upon CRA data (as having noCRA score would usually mean thatthey are unable to determine thelevel of credit risk associated with theapplication), leading to an automaticrejection.But analysis of the arrears rates andpayment data revealed customerswith no score perform no worse thanSalad Money’s typical customer.This suggests that these customersmay be being excluded unnecessarilyby other lenders that rely upon CRAdata to make their lending decisions.The retro analysis also consideredrepayment performance and enabledSalad to compare Crouton (ourproprietary machine learning system)with the credit score from the CRA.Crouton uses each applicant’s banktransactions (accessed via OpenBanking) and application form data todetermine their likelihood to repay. Itrevealed:• Open Banking and CRA dataare very well correlated in manyaspects.• Crouton is more effective atidentifying high/low risk loans.• Open Banking also providesinformation that would not beavailable on a credit file: EG, manySalad customers are privatetenants, with rent payments notreported to CRAs.• More than 10% of customers do nothave a credit score.• Open Banking unlocks theability to lend affordably tothese customers; Salad has lentover £4m to customers whowould otherwise be excludedby lenders that rely upon CRAdata, and these loans performno worse than a typical Saladcustomer, suggesting they arebeing excluded by other lendersunnecessarily.• Open Banking is a superior way ofunderwriting Salad’s customers,with CRA data offering littleadditional information whichcould not be calculated from OpenBanking access.Comparing the value of Credit Reference Agency data with Open Banking when serving financially excluded people7
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