Thursday, October 2, 2008

Need a p2p loan? Avoid Zopa

I have never considered the possibility I might be denied for a loan - yet it happened today. Only once in my life have I ever missed or been late on a payment (about four years ago I moved and the utility company didn't forward my last bill). I pay off my entire credit card balance every month. I have no debt except a home mortgage. My FICO score is over 700 and Prosper gives me a shiny AA rating.

On this blog I've largely neglected Zopa while writing much more about Prosper, Lending Club, Fynanz and Loanio. So, just for kicks I decided to go through the application process and write about obtaining a loan through Zopa. Imagine my suprise when I got this message.



"For Zopa to work, we can only arrange loans to folks with pretty good credit - a minimum FICO of 640, among other things."

What other things could they be talking about? According to the FAQ you need:
  • a minimum credit score (FICO) of 640
  • income of $2,000 per month
  • and a few years of credit history

Well, I have more than $2,000 per month income and I've got more than a decade of credit history. What else could they want? I found some more requirements on this splash page:

  • Miniumum FICO score of 640
  • Minimum of 3 years of credit history with at least 5 accounts
  • No recent bankruptcies or serious delinquencies
  • Stable gross income of at least $2,000/month
  • Borrowers utilizing less than 60% of the credit available to them are more likely to be approved for a Zopa loan and at a lower interest rate
  • A debt service ratio/debt to income of less than 50% of gross monthly income

Hmmm...no problems with any of these requirements. I sent a note to customer service requesting specific information about why I was declined. I received a vague response, "Since you do have a score above 640 it looks like the application was declined for one of the other reasons." I followed up with a phone call and was told the borrower requirements have changed within the last 30 days.

An email to their media contact was returned undelieverable.

Fearing identity theft or something worse, I logged in and pulled up my credit report. Only one surprise. There is a new item on my credit report - a credit inquiry today for a loan. The only inquiry on my credit report at all. Unlike Prosper and Lending Club, Zopa pulls a "hard" request when you inquire about a loan. I should have read all of the FAQ throughly before requesting a loan. Here's what Zopa has to say about their "hard" inquiry:

"We think it's best if you assume that there will be an impact to your credit score. That means you should only get a quote if you really would be interested in a Zopa Loan."

I would add - you should only request a quote if you have perfect credit and don't mind a hard inquiry on your credit score even if you decide not to obtain a loan through Zopa. Try one of the other p2p lending platforms (like Lending Club) which do not pull a hard inquiry.

15 comments:

Matt said...

I think by law they are required to tell you exactly what requirement you didn't meet (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre15.shtm)

From the Equal Credit Opportunity Act:

You have the right to:
"Know why your application was rejected. The creditor must give you a notice that tells you either the specific reasons for your rejection or your right to learn the reasons if you ask within 60 days.
Acceptable reasons include: "Your income was low," or "You haven’t been employed long enough." Unacceptable reasons are: "You didn’t meet our minimum standards," or "You didn’t receive enough points on our credit-scoring system." Indefinite and vague reasons are illegal, so ask the creditor to be specific.

Tom said...

Thanks - I'll ask and then post a follow-up.

Tom said...

It looks like I'm not the only one suprised by a Zopa rejection in the past few days. This is on the forum:

"I am just confused as to how my bank says I have a great credit rating and Awesome debt to income ratio but I get denied by Zopa."

Anonymous said...

Same sort of experience with Zopa.com. I have a credit score of 757, make over $3,800 per month, have a DTI of under 25% and meet all of the other minor criteria and they couldn't even approve me for a small loan of $1,500, tried twice until I ran out of attempts with them (they limit you there as well to two attempts). Shameful... Hope Zopa.com fails with this sort of unfairness toward people who could easily obtain credit elsewhere. Unfortunately, they lost my business when I was able to obtain a loan via LendingClub.com! Wish they were back from the SEC review already! They additionally sent a letter explaining why I was denied which didn't match up with my credit report, which I pulled around the same time (DQ's, late payments and other lies).

-F

Tom said...

F, when did you apply? Was it very recent?

Eric said...

I applied when they first opened in the US and was denied, just like you were. I was really suprised. Zopa is NOT P2P - it is just an interface (golly, front sounded bad) to a bunch of credit unions. Where is the P2P in that? I guess that Hard Pull will roll off in 2 years - thanks ZOPA!

Tom said...

Eric, I agree with you that Zopa doesn't seem like p2p lending. Buying a $500 CD is a bit different than picking borrowers on Prosper. I guess that's one of the reasons I haven't written about them too much.

OTF said...

Maybe Zopa does not have enough funds (Borrowers) coming in to satisfy ALL of the demand for their loans. So in a situation for excess demand for loans & not enough supply of money, they simply tighten up qualifications to get a lower default rate.

Tom said...

OTF - you may be right. However, if you are, people should know about it. It's not really fair to place a "hard inquiry" on someone's account if there is virtually no chance they will get a loan.

Lazy Man and Money said...

I have the perfect credit apparently. I had no trouble getting a loan. Then again this was more than 30 days ago.

Is it any surprise that they've changed requirements in the last 30 days?

Tom said...

Lazy - given the market conditions it is really not a surprise they have changed their requirements in the last 30 days. HOWEVER, if they have, they need to let their users know. Especially if their new requirements preclude nearly everyone from getting a loan.

The sting is also a big greater since the inquiry shows up on your credit report - unlike Prosper. I admit, I should have read the fine print a bit more and should have known about the hard inquiry. But, given my near-perfect credit history, it was a total shock to be denied a loan.

Tom said...

I should add - I got an email from Zopa on Thursday night last week that indicated there may have been a software glitch. Customer service reps could not tell me specifically why I had been turned down on the loan and were going to check into it. They said they would get back to me Friday morning. It's Tuesday and I haven't heard from them yet.

Wiseclerk said...

It's history now anyway, as Zopa withdraws from the US market:

Zopa withdraws from US market

Tom said...

Wow, crazy news. I guess that explains some of the erratic behavior over the last couple weeks. Thanks for the tip wiseclerk.

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