There’s so much misinformation and misunderstanding when it comes to credit checks and normally i am quite informative on forums like MSE, but monzo community is pretty high brow and i see the great Paul Rippon seems to have squashed all the usual misunderstandings in one post!
As an investor I don’t think monzo should be too focussed on reimagining credit scoring when their plan is just to be the best tech hub and outsource balance sheet risk.
What they could do is provide a much better rejection experience for users. I’ve been rejected many a time and the experience is on a sliding scale of awful with lenders just washing their hands of you, from “sorry an error has ocurred, go back to the start” (repeat and then give up), to “unfortunately you’ve not passed the credit checks… go check your credit report at experian/equifax, (click here to go away)”, to “unfortunately you don’t qualify for this offer, but see below for sub prime partner offers (which you probably wont qualify for either despite the bar graph saying 90% chance of acceptance-but they will pay us when you apply to them)”. They basically want you to get off their website if their risk models think you’re not going to be profitable.
This is something monzo could improve on because the goal seems to be customer experience first and profit second so if a customer seems to be of little worth they could still be nice about it and offer them a hand. You could tell users why they’ve been rejected. I’m not an expert but i don’t see why the rejection response couldn’t be “History of defaulted accounts” “High debt to income ratio”, or “Lack of address stability”. You could then explain how this could be improved.
Even fintech lenders like Zopa / Ratesetter have ‘get lost’ responses to rejectees. It would be fitting with the Monzo ethos to help users on their path to improvement rather than telling them to get lost.
If someone applied for a £1000 overdraft but didn’t pass the checks, instead of “Sorry, go ask experian” you could be very helpful e.g. “our credit check has indicated you have very little credit history, we’d be willing to offer you a £50 overdraft to help you grow a credit history (click to accept or reject)”