By John Reynolds on Wednesday 16 October 2019
The peer-to-peer lender says the tool will also help consumers get access to cheaper credit.
Peer-to-peer lender Zopa is launching a new tool which it says will simplify the credit worthiness process and help customers get access to cheaper credit.
Zopa, the first ever peer-to-peer lending platform, is launching the tool, called Borrowing Power, as it says that lending decisions and credit worthiness have been "shrouded in mystery" for too long.
The tool, which is free of charge, works by giving Zopa customers a borrowing score between one and ten. Customers are shown why they are given the score and how they can help improve the score.
The score is directly linked to a particular Zopa loan it unlocks, so customers can see what loan and rate they are eligible to take out.
Customers will also see the changes in financial terms if they improve their credit score.
According to Zopa, the tools uses a "complex process", using criteria such as credit score data, credit use and credit limits.
"Ultimately, improvements in a borrowing power score can significantly lower the cost of borrowing for customers," says Zopa.
“With Borrowing Power, we are putting the power back into the hands of the customer – allowing people who may not be eligible for credit, or those who want a lower rate, to take action and unlock a lower rate in the future."
"Zopa wants to take away the smoke and mirrors linked to credit worthiness. This new tool takes us one step further towards helping people feel good about their money.”
To address other consumer concerns, in all cases, Zopa shows real rates so that customers know exactly what their rate of interest will be should they decide to take up the loan, rather than the advertised rates offered by other loan providers.
Zopa also only performs soft searches on customer’s credit history so Borrowing Power can be used over time with no impact on consumers’ credit score.
Zopa pointed to research carried out by Opinium, which showed that one in ten adults don't know what a credit score is and that 29 percent of British citizens don't understand how to improve their credit score.