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Open Banking adoption has reached new heights, with one in five UK consumers and small businesses now actively using the technology. In March 2025 alone, a record 31 million Open Banking payments were made, signalling a major shift in how the UK manages its finances.
These figures are crucial because they represent more than just a trend, they show that lenders now have access to real-time, accurate data that reflects how people are managing their money right now.
This shift is particularly significant for borrowers who have struggled to get a loan because of bad credit. While Open Banking doesn’t erase past financial hurdles, it allows lenders to look beyond a static credit score. By sharing a secure, up-to-date view of your account activity, you can demonstrate your current affordability and financial responsibility, giving lenders a more balanced picture of your life today.
What is Open Banking?
Open Banking is a secure system that allows you to permit selected lenders to view your recent bank transactions. The view is time-limited and controlled by you.
It shows salary credits, regular bills, subscriptions, and what is left after essentials. You don’t need to hand over any of your online access or banking passwords. Legitimate Open Banking providers request secure permissions without asking for login credentials.
It only shows a short bank statement to someone who will view it for a temporary period to decide whether you can afford a loan.
Does Open Banking Affect Credit Score?
Open Banking itself doesn’t create or change a credit score because it’s a source of data, not a file of record.
Some lenders may use Open Banking in their initial assessment, and if a loan is granted, they may report it to CRA’s (Credit Reference Agencies), which will then record it on your credit file.
However, approvals may depend on affordability checks and individual circumstances.
How Is It Better Than A Credit Score
Saying Open Banking is better than a credit score would oversimplify the fact that they serve separate purposes.
A credit score records past borrowing and repayment events, while Open Banking provides a recent, transaction-level view of how money moves in and out of an account.
One is a historic ledger, and the other is a short view of current cash flow. Depending on the situation, one may be more useful than the other.
Let’s look at how it could be better:
1. Holistic Financial View
A credit score may miss ongoing positives that do not show up on a file. Open Banking can show regular salary deposits, rent or mortgage payments, and whether essential bills are being paid on time. For someone with old defaults who now keeps a steady monthly routine, this additional context may make a difference to how affordability looks to a lender.
2. Accurate Assessments
Credit files are often lagging indicators, while Open Banking gives access to real-time visibility. That means events such as a new job, a regular side income, or lower household costs can become apparent quickly. Some lenders that use transaction data in their underwriting may therefore produce assessments that better reflect current affordability. This will depend on the lender’s system and policies.
3. Increased Transparency
When you grant permission via Open Banking, you can see exactly what is being shared and for how long. That explicit permission can feel more transparent than being assessed solely by a historical score. Some people appreciate being able to show recent activity as evidence rather than waiting months for a credit file to change.
4. Innovation and Choice
Open Banking has encouraged new comparison services and alternative lenders to experiment with different ways of assessing risk. That creates more routes to market and more options for borrowers. More options do not guarantee better outcomes for everyone, but they may provide additional possibilities for people who previously found mainstream borrowing harder to access.
5. Potential for Better Deals
If recent transactions demonstrate reliable income and spare cash after essentials, some lenders may at times offer terms they might not have offered based only on a poor credit file. This is not guaranteed, and it will vary by lender and by individual circumstances.
For example, applying for Salad Money’s loans does not impact your credit score as they use Open Banking in the initial assessment. If successful, then they report your loan to the CRA. Your credit score will not hold you back from being eligible. However, approval depends on affordability checks and is circumstantial. Likewise, borrowing may have financial consequences if payments are missed.
In Conclusion
Open Banking doesn’t erase past mistakes, but it does provide recent information that lenders may use when assessing affordability.
By sharing a short, permissioned view of recent transactions, you can show steady income and on-time bills that a stale credit score won’t reveal.
Lenders still run affordability checks and may report loans to credit reference agencies, but it creates extra routes to credit for people who’ve rebuilt their finances.
Also read: How Open Banking is Making Same-Day Loans Easier
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