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Can Open Banking Help People with Bad Credit?

Can Open Banking Help People with Bad Credit?

Are you worried that your poor credit rating is going to hold you back from achieving financial freedom in the future? Fear not, as bad credit is not the fiscal death sentence that it once was. There are now a number of things that you can do to ease your monetary woes in this sense, one of which being to embrace open banking.

What is open banking, and how exactly can it help you to alleviate your poor credit problems? To find out, you’re going to have to read on.

The Basics of Open Banking

Open banking has enjoyed a surge in popularity in recent years, and for good reason. It provides its users with a secure and easy way to access their financial information. No longer do people have to book meetings with their banking advisors in order to check their accounts — they can now access their hard-earned cash in a swift and seamless fashion. Whether they’re at home, at work, in a coffee shop, or waiting in a queue, they can check their funds and make sure that they can cover their upcoming payment demands.

As stated at Wired, here are just a few of the specific benefits you will be sure to reap when you decide to embrace open banking:

  • Online/mobile banking
  • A clearer view and tighter grasp of your finances
  • The ability to make direct payments with ease

Open Banking and Bad Credit

So, how exactly can open banking help you to overcome the difficulties that are generally associated with bad credit? First and foremost, it will afford credit reference agencies (CRAs) with the opportunity to paint a better picture of you. Once you open an open banking account, you will be subjected to what is known as a ‘360 score,’ rather than just a credit score. This will allow the CRA in question to see much more than your credit history, which in turn will stand you in better stead whenever you want to take out mortgages or general credit agreements (auto insurance, monthly payments, etc.).

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This is particularly important when it comes to the act of taking out small loans. Ten years ago, if you were to attempt to borrow money from a lender, you would have to demonstrate a squeaky clean credit history — if your score wasn’t up to scratch, you’d be denied your loan on the spot. Now, however, thanks to open banking and the ‘360 score,’ borrowing companies are able to judge you on much more than your credit rating. They can gain instant access to your accounts (after you have granted them this access, of course) and delve much deeper into your financial history. The end result? You get judged on your whole financial outlook, rather than just the negative aspects of it.

Bad credit is no longer the be-all-and-end-all of your financial prospects. If you embrace open banking, you can overcome the stigma of having a poor credit score and, in turn, achieve the true fiscal freedom that you’ve always dreamed of having.

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