How lenders make credit decisions

Credit checks are common when you apply for credit, such as a loan or credit card. Lenders need to assess how much of a risk you would be if they lent you the money. 

To make these decisions, lenders use data from credit reference agencies which includes your credit score, your history of repaying other credit agreements and other related information such as whether you’re on the electoral roll. 

There are a number of factors lenders consider when making credit decisions:

Credit score

Your credit score summarises your credit history. Factors such as repayment history, how much you’ve borrowed and even how long you have lived in your current home impact your credit score. The higher your credit score the more positive this is to a lender.  Credit scores highlight how well you’ve been managing your debts and what kind of risk you might present, should the lender grant you a loan.

Read more about what a credit score is and how to improve it.

Credit history

Credit history is a detailed record of your borrowing and the repayments you’ve made to other lenders. It includes information such as the types of credit accounts you have, your credit limits, and how much you have to pay back each month. This helps lenders see how well you have managed debt in the past.

Read more about missed payments

Debt ratio

Debt ratios are a measure of how much debt you have compared to your income. Lenders are interested to know:

  • How much you spend each month on repaying credit
  • How much of your credit card or overdraft balances you’ve used
  • How much you owe compared to your monthly income

Lenders like to see debt ratios below a certain threshold. The higher your debt ratios, the less likely you will be approved for a loan. 

Read more about the different types of debt ratio.

Income and employment

Lenders need to know that you have a steady income and can afford to repay the loan. They will consider your employment history, job title, and salary when making a decision.


Lenders will check your income and expenditure, so that they can assess whether you have enough money each month to pay back a loan. Some lenders will want to see your bank statements. However, it’s much quicker and easier to use open banking. 


Lenders like stability. Regularly changing addresses is something that lenders can see, and it may have a negative impact on lending decisions.

How credit checks are made

Lenders obtain credit data from credit reference agencies. The major three that you will have likely heard of are: Experian, Equifax, and TransUnion. Credit reports contain information about your credit history, including your credit score, types of credit accounts, credit limits, and payment history.

Lenders may also obtain other information about you, such as your employment history and income. They may request this information through payslips, employment contracts, or use open banking data if you have opted in.

How a credit decision is made

Lenders use the information they obtain about you to consider whether or not to approve your credit application. Approval requirements vary from lender to lender. However, the factors listed above are all taken into account. 

If your credit score is high and you have a good credit history, you are more likely to be approved for credit. However, if you have a ‘poor’ credit score, this does not necessarily mean you will be declined for a loan. Many responsible lenders such as credit unions and building societies will consider other factors to make more informed lending decisions.  

If you are declined for a loan, there are ways you can improve your chances of being approved for credit in the future.

Boost your chances of getting an affordable loan

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