Begin with the decision and legal purpose
The appropriate information depends on the credit product, proposed repayments, consumer circumstances, applicable law and purpose of the assessment. A short instalment loan and a revolving facility may require different evidence about repayment capacity. Creditors should specify which information is necessary to decide on the proposed amount and term before choosing data sources. Relevant information can include verifiable income, regular expenditure, existing debt payments, credit-report history and changes reasonably foreseeable during the agreement. A data item is not appropriate simply because a vendor can supply it. Identify the person providing the information, its collection date and whether it relates to the borrower or someone else. Maintain a purpose-by-purpose mapping that connects each category of information to a particular underwriting question and legal basis.
EU CCD2 Article 18 and permissible information
Directive (EU) 2023/2225 Article 18 establishes a revised framework for creditworthiness assessment using relevant and accurate information on income, expenses and other financial and economic circumstances, with further rules and safeguards in the Directive. Article 19 addresses database access. The framework does not make unrestricted personal-data collection lawful. The Directive and national implementing provisions should be reviewed alongside applicable data protection obligations, including lawful basis, necessity and data minimisation. Member States were required to transpose CCD2 by 20 November 2025; the national implementing measures generally apply from 20 November 2026, subject to transition. Until then, operational requirements must be grounded in existing national laws. Differences in domestic rules and permitted verification methods matter to any lender conducting assessments across several Member States.
UK evidence and proportionate inquiry
FCA CONC 5.2A calls for a reasonable creditworthiness assessment for relevant regulated agreements, considering both repayment risk and affordability risk. A firm should evaluate the extent of checks that are reasonable and proportionate in the particular circumstances. Income, expenditure, existing obligations, credit history and information already known about the customer can be relevant, but a universal document list is not prescribed for every case. More detailed inquiry may be necessary if an applicant has variable income, conflicting figures, a significant proposed commitment or signs of financial difficulty. Firms should distinguish an estimate from a verified figure, use reliable information appropriately and document their reasoning. Reliance on a credit score alone may leave affordability questions unresolved. The current Handbook should be checked for coverage, exceptions and the full requirements.
US fair-lending restrictions on data use
US Regulation B section 1002.6 generally allows creditors to consider information obtained when evaluating applications, but restricts use of prohibited bases and certain protected categories and requires care when evaluating income. A creditor must not automatically discount income because it comes from part-time employment, pensions, annuities or other protected sources under the rule. The probable continuance and amount of income may be considered in a manner consistent with its requirements. Section 1002.5 limits information a creditor may request in defined circumstances. Consumer reports bring separate Fair Credit Reporting Act obligations. A lawful lending data model should identify which regulatory rules control collection, scoring, evaluation and adverse action explanations, and avoid treating all US credit products as subject to one EU-style affordability rule.
Credit bureau, bank account and alternative data
Bureau data can indicate existing accounts, repayment history, defaults or obligations, but it can be incomplete or delayed. Bank transaction data may help verify recurring income and outgoings, although transactions do not always reveal why a payment occurred or whether it will recur. Other information could include employment records or permitted applicant declarations. Before deploying open banking or alternative data sources, assess consent or other legal grounds, accuracy, security, retention and possible disparate treatment. Do not infer sensitive characteristics from spending patterns and treat them as underwriting features without specific legal review. The data model should preserve source labels and uncertainty, not silently convert estimated rent, income or household obligations into verified facts. Challenge mechanisms should allow relevant inaccurate information to be corrected.
Document sufficiency and decision controls
A defensible decision record should identify the information considered, the source and date, material verification steps, assumptions, missing elements, policy version and conclusion. Define escalation when reports disagree or an unexpected cost changes the customer's repayment capacity. Test the decision engine with stale bureau records, irregular income, duplicated transactions, jointly paid expenses and conflicting applicant statements. Keep restricted-data safeguards separate from routine business logic so a new vendor attribute cannot enter a model without review. Creditworthiness decisions also need appropriate explanation and notice processes where required, especially when automated outcomes produce adverse action. Review outcomes against defaults, hardship indicators, complaints and data errors. This creates a traceable link between the statutory requirement, the evidence and the individual decision.
Frequently asked questions
Can a creditor use any available data?
No. Information must be relevant, appropriately accurate and permitted under the applicable rules.
Are UK, EU and US verification requirements identical?
No. They depend on the product and jurisdiction.
Primary sources
Directive (EU) 2023/2225, Article 18 ↗FCA CONC 5.2A Creditworthiness assessment ↗CFPB Regulation B 1002.6 Evaluation of applications ↗CFPB Regulation Z 1026.43 Ability to repay ↗Read the source in its current version. National implementing measures and product-specific applicability may require additional research.