DBRS Morningstar Publishes Commentary on Open Banking and Its Impact on Borrowers in the UK

DBRS Morningstar released a commentary titled, “Open Banking May Improve Credit Scoring, but Risks Treating Borrowers Unequally”.

This commentary focuses on the use of credit scoring to check the creditworthiness of applicants when applying for financial products and changes that DBRS Morningstar has noticed in the way that credit reference agencies report credit scores.

Historically, credit reference agencies provided a credit score based on data reported to them by various financial institutions. However, recently, a new product based on open banking has been added to help applicants who sign up improve their credit score.

The commentary explores how this new product works and whether lenders that use it to make lending decisions are still considered to be treating customers fairly.

Key highlights from the commentary include:
-- An outline of how credit reference agencies are used by lenders;
-- An applicant comparison; and
-- An explanation of how this process risks treating applicants unequally.

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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