The Financial Conduct Authority has rules that lenders must follow when assessing credit applications, which means they have to carry out ‘Responsible Lending Checks’ on all applications.
These checks are in place to protect customers and make sure lenders are acting in the customer’s best interest, by making sure the customer can afford repayments and it’s sensible to lend to them.
Most lenders will complete a hard search when carrying out these checks, which gives the lender an in-depth look at your credit history. They’ll look at info the credit reference agencies (TransUnion, Experian and Equifax) hold on you, including your current debts and other financial commitments.
Lenders will also look at your income and outgoings to make sure you can afford the repayments. You may also be asked to provide additional details, so they can complete their checks, including bank statements, payslips or ID documentation.
Some lenders may also perform an additional responsible lending check using Open Banking information.