We started Koyo to make finance fairer. 

Right from the start, we had a specific problem in mind: most other lenders rely on a small number of credit bureaus to help them decide who to offer a loan to. The trouble is, the data that bureaus use is very limited, and can be months out of date.

The problem with conventional credit checks

Imagine you were going to lend someone some money, and you wanted to make sure that they would pay you back. You’d want to be sure of two things. The first is that repayments are affordable: if you lend thousands of pounds to someone who earns only a fraction of that, that borrower is unlikely to be able to pay you back.

Secondly, you want to be sure that the borrower is someone you can trust to pay you back. There’s no precise way to work this out, but you can make an informed estimate by looking at whether they’ve paid other lenders back in the past. 

Thus this is what most lenders try to do, and they normally use a credit bureau to help them.

Credit bureaus (Experian and Equifax are two that you might have heard of) will check your credit history: they’ll look at your record of borrowing, and try to find out whether you are (1) someone who has always paid off debt on time and in full or (2) someone who has missed payments in the past and might do so again in the future.

Can you spot the issue here? There’s a third option: someone may just not have taken out any credit yet. That’s not to say that they’re a good or bad borrower though – we just don’t know either way.

So here’s the problem: conventional credit checks only give a lender part of the picture. They don’t verify your income, savings, employment or health expenses[1], and they can make it very hard for some groups of people to access credit.

[1] https://www.experian.co.uk/consumer/guides/what-affects-score.html

Using technology to help “thin file” borrowers

A good example of this problem in action is thin file borrowers. “Thin file” is a piece of industry jargon, used to describe people who don’t have a credit history: the file on them is thin.Imagine someone who recently moved to the UK to take up a job. She has a steady income and has plenty left over each month, pays her council tax and phone bill on time and has never defaulted on a loan. However, because she’s never taken out a loan in the UK, conventional lenders would likely view her as a thin file, and she might have difficulty accessing credit.

This is where Koyo comes in – we are able to use Open Banking technology to get a fuller picture of each borrower, and make fairer decisions.

How does Open Banking help?

Open Banking is a secure way for trusted and regulated companies to access your financial information. 

Using Open Banking, you can give Koyo permission to view your bank financial transactions, so that Koyo can form an accurate picture of how affordable a loan is for you. 

Because we’re able to view this information, Koyo is able to offer credit to people who might be turned down by other lenders, who rely solely on old fashioned credit checks. In many cases, we can use this data to price loans more competitively, meaning that borrowers can end up paying less for their loan.

It’s also fast, simple, and the whole process takes place entirely online. And unlike with some other lenders, an application won’t affect your credit score.

This makes finance fairer – and we’ve used our technology to help hundreds of people access credit.

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