Abound bypasses credit scores, but does that mean credit history doesn't matter?

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Credit scores are a lot like passport photos: often out of date and unflattering.

Abound does not use credit scores, and we do not require a long credit history to qualify for a loan. Instead we use bank transaction data to understand our customers' overall financial situation.

However, we do take credit history into account where it is present.

Our approach means we approve more people for loans and offer lower rates than many other lenders. However there are still many reasons why we may not be able to approve a customer for a loan.

In general, Abound can not lend if:

• a loan would be unaffordable for a customer, or
• a customer is behind with their debt repayments, or
• a customer has recent unresolved credit defaults and CCJs, or
• we judge that a customer has potentially unsustainable or rapidly increasing existing credit commitments.
• we detect significant levels of gambling activity from your bank transactions.

We explain more about our assessment process below.

That unflattering credit score...

Your credit score is just one piece of information about your financial situation. It tells lenders whether you have had any trouble with paying bills in the past. When people struggle financially, this is often down to the kinds of misfortunes that can happen to any of us: losing a job, your car breaking down, getting ill. Even if a low credit score is down to bad financial decisions, it should not be the end of the world. People change and can become better at making good choices about managing their finances.

We at Abound believe that where people have started to do better financially, then past misfortunes and poor decisions need not determine their ability to borrow money now. This is why we do not base our decision on credit scores, which take a very long time to improve, but on actual, up-to-date, day-to-day income and spending. This way we can see how people are doing in the here and now.

You know how often people's passport photos don't look that nice? They are an important piece of information about what someone looks like, especially because those automatic passport gates are designed so that they can recognise you based on the photo. (As long as you remember to take off your glasses and stop smiling!) But you wouldn't use them as a profile picture on social media, let alone an online dating site. You would use photos that say something more about who you are right now and about the good things in your life.

This is what we do here at Abound. We don't rely on your credit score, which is a lot like a passport photo: quite possibly out of date and unflattering. Instead, we look at your financial situation more broadly and our decision will be mainly based on how much you are currently earning and spending on a regular basis.

So does that mean you will lend to me even though my credit score is low?

We can only answer this question once we know how much you are currently earning and spending, and after we can review your recent credit perfomance.

Some people have a low credit score simply because they have no credit records, for example when they have not been paying bills or borrowing money in the UK. Other people may have forgotten to pay back a "buy now, pay later" loan or a credit card bill while on holiday. Others may have had more serious difficulties with paying their bills in the past or maybe even had to default on a loan.

At Abound we only lend to people if we think that they can pay back the loan in full out of their income. This is because we believe that increasing the amount someone has to repay each month when they are already struggling with their spending would not be the responsible thing to do.

Abound is proud to consider lending to people who have had credit problems in the past, but where we can see that they have resolved their debts, they are currently up-to-date on all their payments, and that the loan is affordable.

We are all already juggling lots of different financial commitments: repaying existing loans and credit card debt, paying for utilities, the gym membership, petrol, groceries. When you give Abound permission to access your accounts through open banking, our computer algorithm looks at all of your regular income and spending. Sometimes this will tell us that, on balance, you cannot add another loan repayment to your existing spending, because then you would suddenly earn less than you have to pay out every month.

If someone has fallen behind on repaying a number of their bills and has not been able to catch up, then borrowing more money is probably not the right decision. In these cases, the best thing to do is to work on repaying existing loans before taking out new ones. We have put together a list of organisations that can help you figure out how to do this (see here).

Our lives and finances are works in progress. Even if we decline your request for a loan today, when your financial situation improves, you can re-apply and we might then be able to give you a loan even if your credit score has not improved in the meantime.

Affordable loans based on you

We're excited to announce that Abound is now live and accepting loan applications!

As a quick refresher, while we don't require a long credit history to apply for a loan, we do need you to:

- Be at least 18
- Live in the UK
- Have at least one UK bank account
- Have no unresolved defaults or CCJs

To apply for a Abound loan click here

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