Salad Money Credit Where Its Due Report WEB SINGLES - Flipbook - Page 7
CUSTOMERS WITH
DEFAULTS, WITH
CCJS, AND WITH NO
CREDIT SCORE
Lenders which rely on CRA data would
typically view a CCJ or default as a ‘credit
impairment event’ and therefore may decline
the customer’s application.
However, the analysis revealed:
• The percentages of accepted
and declined customers with an
insolvency or CCJ were identical
(35%).
• More accepted customers (80%)
than declined customers (75%) had
at least one default registered in
the previous six years.
• 10-11% of customers do not have a
credit score.
Having no score may be a fatal policy
decline reason for many lenders that
rely upon CRA data (as having no
CRA score would usually mean that
they are unable to determine the
level of credit risk associated with the
application), leading to an automatic
rejection.
But analysis of the arrears rates and
payment data revealed customers
with no score perform no worse than
Salad Money’s typical customer.
This suggests that these customers
may be being excluded unnecessarily
by other lenders that rely upon CRA
data to make their lending decisions.
The retro analysis also considered
repayment performance and enabled
Salad to compare Crouton (our
proprietary machine learning system)
with the credit score from the CRA.
Crouton uses each applicant’s bank
transactions (accessed via Open
Banking) and application form data to
determine their likelihood to repay. It
revealed:
• Open Banking and CRA data
are very well correlated in many
aspects.
• Crouton is more effective at
identifying high/low risk loans.
• Open Banking also provides
information that would not be
available on a credit file: EG, many
Salad customers are private
tenants, with rent payments not
reported to CRAs.
• More than 10% of customers do not
have a credit score.
• Open Banking unlocks the
ability to lend affordably to
these customers; Salad has lent
over £4m to customers who
would otherwise be excluded
by lenders that rely upon CRA
data, and these loans perform
no worse than a typical Salad
customer, suggesting they are
being excluded by other lenders
unnecessarily.
• Open Banking is a superior way of
underwriting Salad’s customers,
with CRA data offering little
additional information which
could not be calculated from Open
Banking access.
Comparing the value of Credit Reference Agency data with Open Banking when serving financially excluded people
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