If you have ever borrowed money, you’ll know that Credit Reference Agencies (CRA) will have a hand in a lender’s decision-making process, providing access to your credit report. We all know that having a good credit rating is important to find lenders willing to help when needing to borrow money or purchase goods. Outside of the main CRAs, there is a new service on the market that you may have heard of – Credit Kudos. But what is Credit Kudos, and how can this new option help borrowers?
For a long time, Experian, Equifax, and TransUnion have been the main CRAs that hold information on you for lenders to view. They are independent organisations that securely hold valuable information about your financial history which hugely influence a lender’s decision-making process. Traditionally this meant if you had a poor credit rating, you would find it very difficult to borrow money. These days, however, there are many lenders of bad credit loans online that can help by focusing more on your affordability and current finances rather than your financial past. Credit Kudos are a new type of CRA that uses financial behaviour to measure creditworthiness, made possible because of open banking regulations. This is a different approach to the other CRAs and means borrowers have a better chance of being accepted and will get even faster decisions.
Credit Kudos is possible due to open banking, where third-party developers can build applications and services using open APIs (Application Programming Interface). Ever since the payment services directive (PSD2) helped changed the rules to allow more innovation with online and mobile payments in 2015, this has allowed licensed startups to have direct access to data held by the 9 biggest UK banks, including Barclays, HSBC, and Santander. This is something the competition and markets authority (CMA) issued a ruling for in 2016. For companies like Credit Kudos, this meant being able to access the information they needed to provide an alternative CRA service for businesses and consumers alike.
According to Credit Kudos, open banking allows them to identify predicted and historical income for an individual. This includes their sources of income, employer name and industry and will provide lenders with an income stability score and also income shock indicators, flagging any issues with income. Their service offers to streamline manual underwriting and provide rich insights so that a lender can access thorough affordability checks to help provide a decision. This is important for lenders who provide bad credit loans as they need to understand an applicant’s affordability before approving a loan.
Credit Kudos provides an alternative way to access an individual’s financial data and provide comprehensive risk insights including fraud prevention. In the same way that customers have far more choice with lending products than ever before, lenders now have more options to fairly assess applicants. For customers who feel they are being unfairly declined by lenders, it provides an opportunity for lenders to have even more insight into creditworthiness and focus on affordability.