Zopa launches new credit-scoring tool
Peer-to-peer lender Zopa has launched a new free credit-scoring tool which it says will help "demystify" lenders' decisions. But if you're thinking of taking out a loan, always do your own research to make sure you get the best rate.
Zopa's new 'Borrowing Power' tool gives would-be borrowers a personalised score between one and 10, as a measure of their attractiveness to lenders. It's calculated using a combination of credit score data, how much credit the customer's using, credit limits, hard searches and affordability.
The tool is part of Zopa's app, available on Apple and Android. It's free to use and you don't need to have or be applying for a Zopa product to use it. Zopa says the tool only uses 'soft' credit searches to get information, so credit scores shouldn't be affected by using it.
See our How to check your credit report guide for more info on checking your score for free, plus our Cheap Personal Loans guide for the top rates and more info on the golden rules of taking out a loan.
How does the tool work?
Users will be shown the different factors that affect their score and given suggestions of specific actions they can take to improve it, such as registering to vote or being added to a utility bill.
The user's 'borrowing power' score is also linked to Zopa's own loan products, so you'll be able to see which Zopa loans you're eligible for and at what rate, in the 'Eligibility' section of the app. Better rates will be "unlocked" as your borrowing power improves.
However, be wary of using the 'Eligibility' section of the app to find a loan, as it will only show Zopa products. If you are thinking about taking out a loan you should always check the best rates across different lenders – and of course, make sure the loan is carefully planned and budgeted for. Our Loans Eligibility Calculator can give you an idea of which loans you're most likely to be eligible for.
And remember that Zopa's tool is just one of many resources you can use to get information about your credit score. Zopa uses the Equifax and TransUnion credit agencies to collect information on credit scores – but you can also check your Experian credit score via our Credit Club, while Clearscore offers access to your Equifax score and Credit Karma lets you check your TransUnion report.
All three services are free to use – and our How to improve your credit score guide has full info on steps you can take to make yourself more attractive to lenders.