The Real Decisioning Structures Behind the UK Credit Industry

In the UK, when it comes to borrowing, the discourse typically revolves around credit scores. Specifically, those three-digit numbers are provided by agencies like Experian, Equifax, and TransUnion. We’re told that these figures determine our financial fate and whether we can secure a loan or mortgage.

What we’re not told is that there’s a catch. Lenders don’t rely on your consumer-facing credit score per se to assess your borrowability. In fact, most lenders don’t even use the bureau-provided score. Instead, they take an intricate look into the underlying data within your credit file – using their own proprietary algorithms to decide whether or not to lend. This, therefore, raises important questions about transparency, trust, and how the fintech sector could drive much-needed change.

More than a number

When applying for a loan or mortgage, lenders aren’t simply glancing at your, say, Equifax score. They are accessing the raw credit data that informs that number, and running it through their own decisioning models.

These components go far beyond a simple three-digit score and include elements such as payment history, credit utilisation, length of credit history, types of credit used and recent credit inquiries. Data such as missed council tax or mobile phone payments, maxed-out credit cards and how long credit accounts have been active with institutions like Barclays or HSBC are taken into account to form a more holistic view of an applicant's financial track record.

These inputs are often combined with additional affordability assessments, such as income checks and debt-to-income ratios, to create a fuller picture of financial behaviour. Importantly, these assessments are unique to each lender. The decisioning logic used by Nationwide may differ significantly from that of Santander, and each institution weighs factors differently depending on risk appetite, product type and regulatory obligations.

The consumer education gap

This disparity between what we think affects our creditworthiness and what actually matters can leave UK consumers feeling misled. We’re bombarded daily with advice on how to “improve your credit score”, whether it’s through credit builder cards, credit monitoring subscriptions or following tips on platforms like MoneySavingExpert. However, these efforts often miss the mark, because they focus on inflating a score that many lenders don’t even use.

Without better education on how lenders evaluate borrowers, many people may waste time and effort chasing an inflated score. For example, someone might apply for multiple credit cards to boost their score, only to find that their approval odds remain unchanged, or even worsen, because lenders are more focused on underlying behaviours like utilisation rates or payment consistency.

This confusion is compounded by a lack of clear guidance from trusted institutions. While bodies like Citizens Advice and the Financial Conduct Authority (FCA) provide valuable support on financial rights and responsibilities, they could play a more proactive role in demystifying lending criteria. Helping consumers understand that building good financial habits is more powerful than gaming a score would be a step toward fairer outcomes.

To reshape the conversation around credit, we need to move past the obsession with achieving a ‘perfect’ score, such as the 1,000 on Equifax (under its new scoring system introduced in April 2021), and instead focus on cultivating a financial track record that signals long-term reliability to lenders.

When zero balance means zero score

Here’s a lesser-known truth: paying off all your credit and closing every account can actually hurt your creditworthiness. Why? Because once your credit activity drops to zero, there’s nothing left for lenders to assess. No active accounts means no ongoing data – and that creates uncertainty. In the eyes of a lender, a thin or dormant credit file can be riskier than one showing responsible, ongoing use. Ironically, staying visible in the system, by keeping a small balance, using credit periodically, and paying on time, is often more beneficial than wiping the slate completely clean.

The role of Fintech

The rise of UK-based apps like Monzo and Starling Bank offers a glimpse into how technology could fundamentally reshape how borrowing decisions are made. These platforms already help users track spending and manage finances, but imagine if they went a step further. Instead of simply displaying your credit score, they could unpack the real mechanics behind lending decisions.

By harnessing open banking data and AI, these apps could show how specific behaviours, such as your credit utilisation or the timing of your repayments, directly influence your likelihood of being approved for credit. This shift from a static score to a dynamic, transparent model would allow borrowers to better understand and manage the factors that truly matter to lenders.

Such insight would be transformative. It would enable consumers to take precise actions based on actual lending criteria rather than vague advice or generic credit tips. Fintech innovation is uniquely positioned to make credit assessment more inclusive by leveraging real-time financial behaviour, not just legacy credit history, to build a fuller picture of someone’s borrowing profile. This could open up access for many who are currently underserved or misjudged by traditional scoring models.

The current UK credit system is often opaque and difficult to navigate. As awareness grows around the gap between a credit score and what lenders actually value, there’s an opportunity to reshape how borrowing works. Supported by smarter consumer education and fintech innovation, the industry could evolve toward a model where people are equipped to manage the system behind the score, rather than blindly chase a number.