How lenders make credit decisions

Last reviewed April 2026

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Lenders decide whether to offer you credit by assessing risk. They look at your credit score, repayment history, debt levels, income, affordability and address stability — drawing on data from credit reference agencies like Experian, Equifax and TransUnion. No single factor guarantees an approval or decline.

When you apply for a loan, credit card, or mortgage, the lender's job is to work out how likely you are to repay what you borrow. To do that, they pull together information from several sources and weigh it up against their own lending criteria.

What factors do lenders look at?

Lenders consider a combination of factors, not just one number. Here is what they typically assess.

1

Credit score

Your score is a snapshot of how well you have managed credit over time. A higher score signals lower risk. Factors like repayment history, how much you have borrowed, and how long you have lived at your current address all feed into it. Read more about what a credit score is and how to improve yours.

2

Credit history

A detailed record of your borrowing: the types of accounts you hold, your credit limits, and whether you have made repayments on time. Missed or late payments stay on your file for six years. Read more about how missed payments affect your record.

3

Debt ratio

How much of your income already goes toward repaying credit, and how much of your available credit (such as credit card limits) you are currently using. Lenders prefer lower debt ratios, the higher yours is, the more cautious they will be. Read more about debt ratios explained.

4

Income and employment

Lenders want to know you have a reliable income to repay what you borrow. They will consider your employment status, job type, and salary. Some lenders ask for payslips or an employment contract.

5

Affordability

Beyond your income, lenders look at your outgoings to check you have enough left over each month. Some will ask to see bank statements. Others may use Open Banking, which gives a faster and more accurate picture of your actual spending.

6

Address stability

Lenders value stability. Frequently changing address can be a negative signal. Being registered on the electoral roll at your current address helps lenders verify your identity and shows you are settled.

Where do lenders get this information?

Lenders obtain your credit data from credit reference agencies (CRAs). The three main ones in the UK are Experian, Equifax, and TransUnion. Your credit report held at each agency may differ slightly, which is why one lender may approve you when another does not.

Lenders may also ask for additional information directly, through payslips, employment contracts, or open banking data (if you have opted in).

Important: Not all lenders check all three credit reference agencies. It is worth checking your file at each one to understand what they see.

How a final decision is made

There is no single formula. Each lender sets their own criteria and weighs factors differently. A poor credit score does not automatically mean a decline. Many responsible lenders, including credit unions and building societies, consider the full picture rather than a single number.

Equally, a high credit score does not guarantee approval. Your current affordability matters just as much.

Factor	What lenders prefer to see	What may give them pause
Credit score	Higher score over time	Recent missed payments or defaults
Credit history	Consistent, on-time repayments	Gaps or short borrowing history
Debt ratio	Low proportion of income committed	High credit utilisation or many existing debts
Income	Stable, verifiable employment	Self-employment without clear records
Affordability	Clear surplus after outgoings	Little or no margin each month
Address	On electoral roll, long tenure	Frequent moves, not on electoral roll