When someone asks for credit, lenders put together a profile of the borrower using a number of pieces of information. This helps them decide if lending is a good idea for the lender and fair for the borrower.
These kinds of tests are becoming more common in the credit market. According to publicly available industry data, a lot of adults in the UK use some form of credit. A survey from 2024 found that about 84% of adults in the UK have some kind of credit or loan. This shows that borrowing is common.
At the same time, consumer credit grew by about 7.8% a year in the middle of 2024, and borrowing on credit cards rose by more than 10%. Lenders look at applications using their own rules when people borrow this much.
Companies like Salad are using more and more tools like permissioned Open Banking connections in these assessments. By January 2024, about one in seven customers who used the internet had signed up for Open Banking. As a result, the first steps now often include real transaction data instead of just credit scores.
Still, there are different types of credit providers, and each has its own list of things to check. Let’s see how these work in real life.
Here are the four steps that lenders usually take to decide on credit.
1. Identity, paperwork, and bank data that has been approved
Lenders first check the applicant’s identity and other important information. This overview stops simple mistakes and cuts down on fraud. Using Open Banking, a lot of lenders want to see your recent bank transactions.
This gives a better idea of income and expenses without having to ask for passwords. Legitimate Open Banking providers ask for secure permissions without needing to know your login information or any other passwords.
2. Credit Reports and Scores
Credit reference files and scores give you information about the past. Different lenders use them in different ways. Some lenders don’t look at credit scores when they first decide whether to lend money. Instead, they look at bank data that has been approved. Other lenders look at a credit file during the underwriting process to see how the borrower has paid back loans in the past.
Depending on their policies, a lender may look at credit files and credit scores as part of their overall evaluation.
3. Income, costs, and what you can afford
Lenders want to know if you can realistically make payments on top of your other obligations. They look at how much money you make on paper and how much you spend each month on things like rent, mortgage payments, council tax, utilities, and other credit payments.
They also think about timing because the dates of paydays and bills affect how much they can handle each month. Affordability checks, personal situations, and the rules of each lender all play a role in approvals.
4. Lenders Look for Patterns and Context
Lenders look at more than just raw numbers. They also look for patterns that show stability or strain. They might write down how long someone has lived at an address or used the same bank.
They might think about whether account balances are always low or if missed payments on a credit file stand out. These signals don’t decide the outcome by themselves, but each one adds to the context of the rest of the application.
How Applications Go From Checks to Choices
Most lenders use automated checks first because those systems can quickly look at a lot of applications and apply the same rules to all of them. These systems have their own scoring models and affordability tools, and they point out areas that might need more attention.
Built-in identity and anti-fraud checks often run at the same time to find problems early. When reference data and permissioned bank feeds are available, a lender may combine the results from both.
When an application looks strange or on the edge, a human reviewer often steps in and may ask for more proof, documents, or an explanation. Checking for strange payments or confirming employment details can be part of that manual review. This can change the timing and the result compared to a fully automated approval.
Because each lender has its own rules, similar applications may get different results. With that in mind, let’s look at how Open Banking can change this.
How Open Banking Can Make This Different
Permissioned Open Banking can change the early stages of an application because it lets lenders see real income and spending patterns instead of just looking at documents. When a lender can see actual inflow and outflow, it is easier to understand how money moves through an account over time. This gives a better picture of how affordable things are on a daily basis.
Sometimes, this information gives a clearer picture than a single payslip or a one-line summary on a credit file because it shows timing, frequency, and consistency, not just totals.
Even with Open Banking, some lenders may still ask for payslips or bank statements if the applicant’s income is not steady. Others may want proof based on their rules and the applicant’s situation. Open Banking doesn’t replace every step of the process because it uses a mix of data sources. However, it can give lenders more transaction data that they can use to make an initial decision.
To sum up
From the outside, credit decisions may seem complicated, but each provider has its own way of following a set routine.
After looking over all the parts of the assessment, the lender makes a final decision based on the information they have and the rules they follow. At that point, the process is over and a choice is made.
For a lot of people, just knowing how things work makes them clearer and easier to understand.
