Hi everyone,
Thanks again for your feedback, it’s been so useful to hear your thoughts after having taken a look at our loans.
As part of our efforts to always be transparent, we try to give each person a reason as to why we can’t lend to them, without sharing any information that we’re not allowed to for legal or security reasons. We can see we haven’t quite nailed this, so we’ll put some more effort into thinking about how we communicate these reasons more clearly on the screens you’ve been sharing.
Deciding who we can responsibly lend to is a pretty complex job. We look at a lot of data and use it to work out if we think someone can afford to borrow, as well as how likely we think it is that they can pay us back. It’s important we get this right, to make sure we protect our customers and our long-term business.
When we’re making this decision, we take these things into account:
Credit reference agency data
We currently use TransUnion as our credit reference agency and you can see a copy of your data using CreditKarma).
This includes details about other borrowing you might have, how much you’ve used it and whether you’ve always paid back on time.
We have some “hard rules” based on this data that help us to make sure we lend responsibly. We can’t detail all of our rules for security reasons. But as one example, if you’ve had a default in the last few years then we don’t currently offer you a loan.
If you pass these checks, we use this data to create a score we call the “Monzo loan score.” We use this score to decide if we can lend to you and what rate we can offer you.
Your income and expenditure data
We need to make sure that you can afford to pay back the loan we’re offering you, so people don’t get into unmanageable debts. To do this, we might ask you for your income and then verify it with data we get from the credit reference agency. They estimate your income based on information from all the bank accounts you have.
We then use a model to decide if we can lend to you. This looks at:
- national statistics
- your age
- where you live
- your income
- your mortgage
and other borrowing commitments.
Along with these factors, we also look at whether you actively use your Monzo account or Joint Account and your employment status.
We hope this gives a bit more clarity as to how we decide whether we can or can’t offer you a loan. It’s not an exact science and we’re constantly trying to get better at it so that we can offer more of our customers a loan with us, while still lending responsibly.
We’ll keep reviewing our processes and listening to your feedback to help us make this as effective as possible.