Credit Scoring Lending – Why The Same Questions?

Credit Scoring CubeMost mainstream banks use credit scoring as their primary way to assess and judge lending applications.

These credit scoring systems have developed and are now extensively used in making both personal and business lending decisions.

Most banks will ask the same sort of questions, so we thought why not tell you why these questions are being asked, sort of makes sense really…

Stability Questions

These are about how likely you are to do a runner. In other words, are you going to be easy to find if it all goes wrong.

  • How long have you been in your job
  • How long at your home address
  • Any dependents
  • Homeowner rather than a tenant
  • Type of job role you have

This makes sense when you consider that someone working in a management position, who owns their own home and has a family is much more likely to be stable and in one place.

Someone with no dependents, a short tenancy agreement and no work commitments could up sticks and move at short notice.

Trust Questions

This is about what other people think about you. Ironically some of these questions are a little dated and have changed in the last few years, things like;

  • Are you a homeowner
  • Mobile phone on a contract rather than pay as you go
  • Do you have a debit or credit card
  • Type of job role you have
  • What industry sector do you work in

With this the thinking is that if you are a homeowner, phone on contract and working in a professional industry then several people must trust you. You have a mortgage company who think you are a good bet, a phone company trust you and you are in a respected business sector.

If none of the above apply then the question is why? What is there that means none of the above apply?

Other Factors

There are plenty of other factors that go into making a lending decision but each of the above will add or remove ‘points’ from you credit scoring result.

Add onto this the result from a credit search then the whole system starts to become more understandable with a degree of common sense.

We are not saying that credit scoring is accurate or all of the above are definite, they are not. The idea is that they are indicators.

If you want any more details about credit scoring then give us a call on 01293 541333 or contact us via the website. Alternatively, add your comments above and we will always respond.

By David Farmer

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.