If you’ve been paying attention to the Zopa blog, you may remember a previous post where I promised to start a serious of posts on how Zopa manages credit and credit scoring in general.
Well, this is part 2!
I thought I’d spend a little time describing how our credit process works - hopefully that’ll be useful for anyone applying for a loan at Zopa, and might be interesting for everyone else as well.
When you join Zopa, you get your credit score that we obtain from Equifax, and this is what is used to place you in a market where you can borrow from Zopa lenders. (Read the previous post for more about credit scores if you’re interested.) When you go to borrow, we show you how much your loan is going to cost you and ask you a series of additional questions to get a better view of you and your finances. We also set up a direct debit at this stage so that your lenders can get their money back!
After a borrower has been ‘matched’ with lenders, that money is taken off the market (although lenders continue to earn interest on it) and the borrower is submitted to our underwriting team for a decision about whether to approve tha loan or not. We need to do this because just a credit score isn’t enough to determine whether someone is creditworthy or not - it’s just an indication.
The underwriters will look at a borrowers address history, employment history and their existing levels of secured and unsecured debt. If necessary they will phone the borrower or the borrowers employer to confirm details. When they have all that information (and have checked up on the UK’s anti fraud databases (CIFAS and National Hunter from MCL Software) and have decided to approve a borrower, we send a PIN to the borrowers address which we require to be emailed back to us - and then we send out the money!!
It’s a lot of work behind the scenes - but we need to make sure that in Zopa’s early days we don’t expose our lenders to more credit risk than we (or they!) expect. Over time we’ll make more and more of this an automated process, but it’s been very successful to date.
I hope that’s useful - a little drier than many of the posts on the blog, but a little peak behind the web site. Any questions - let me have them in the comments.
Tags: credit score