ZOPA has launched a new customer tool that will give its borrowers more transparency over its lending decisions.
The peer-to-peer consumer lender’s new ‘borrowing power’ tool (illustrated below) gives each user a bespoke borrowing power score between one and 10. Customers are then shown what makes up their borrowing power and how they can improve it.
The scores are created from a combination of credit score data, credit utilisation, credit limits, hard searches and affordability based on personal circumstances.
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Zopa claims it is the first time a credit tool has been directly linked to a lending product and can offer customers better rates as they improve their borrowing power.
“Giving people certainty, transparency, and ultimately the power to lower the cost of credit in the future is unique in the market,” said Didier Baclin, Zopa’s chief product officer.
“With ‘borrowing power’, we are putting the power back into the hands of the customer – allowing people who may not be eligible for credit, or those who want a lower rate, to take action and unlock a lower rate in the future. Zopa wants to take away the smoke and mirrors linked to creditworthiness. This new tool takes us one step further towards helping people feel good about their money.”
The ‘borrowing power’ score is directly linked to the particular Zopa loan it unlocks, so that customers can immediately see if they are eligible for a loan and at what rate. The new functionality will be available for Zopa’s other credit products, such as credit cards, once they are launched.
Zopa calculated that a customer taking out a new loan with Zopa could save an average of £600 over the loan period by increasing their borrowing power score by one point. Furthermore, someone borrowing £7,500 over three years could save £1,228 by moving their borrowing power from four to five.
The new product launch follows recent research commissioned by Zopa that showed 29 per cent of Brits don’t understand how to improve their credit score in order to access cheaper credit and a further 45 per cent are unsure how lenders calculate the rate of borrowing.
A survey of 2,000 UK adults also found that 61 per cent do not understand credit scores completely, while 48 per cent do not even know what their own score is.