Credit profiling

Enhancing loan performance begins with deeper borrower insight.

Credit profiling enables Loan Officers to evaluate an applicant not in isolation, but in relation to broader lending patterns. By placing individuals into clearly defined risk categories, profiling supports more consistent, informed, and confident decision-making.

*this content is for internal use only by credit unions and is not to be shared with anyone outside of your organisation. Some of the numbers are rounded to protect commercial sensitive information.

Credit profiling places loan applicants into different categories of lending risk. Often referred to as a credit rating or credit profiling, loan applicants are categorised as having an excellent, good, fair, poor or very poor credit profile.

NestEgg uses the Guage 2 score card from TransUnion. Credit profiles and their related credit score ranges are set by TransUnion. Profiling builds a broad picture of the characteristics of credit risk by different cohorts of borrowers.

However, it is important to note that this is just one method of risk assessment.

Credit profiling relies on credit bureau data. However, credit risk indicators cut across data sets. Open Banking is an obvious case in point.

Therefore, NestEgg is using Artificial Intelligence and Machine Learning, in particular, to provide a more nuanced, predictive and credit union specific model.

In the meantime, credit profiling remains the best methodology for assessing portfolio risk at scale. The tables and explanations below are based on credit union data.

Default rates quoted are average and individual credit unions can vary significantly. Defaults are when at least six months payments are missed but the rate does not necessarily equate to write offs as some defaults are recoverable. To find out your Credit Union’s default rates contact us about our Lending Risk Insight Reports.

The tables below relate to loan applications received by credit unions between 1 April 2024 and 31 March 2025. They do not show the final risk profile of borrowers granted credit.

England shows the lowest average loan size (£2,000), the highest share of lending to the very poor credit profile (70%), and low exposure to top-tier credit profiles (only 10% to Excellent and Good combined). This indicates an overall higher rate of higher risk lending, but it is notable that the credit unions within the data set have more than half of borrowers residing in the most deprived regions in England.

Wales shows the highest default rate among all regions at 5%. It also has the highest levels of credit card use relative to income and a high concentration of lending to the Very Poor credit profile (65%). The proportion of CCJs and defaults on file is high, possibly driven the enforcement methods of Welsh Water, as repayment of this type of bill is the lowest across all regions. The higher accept rate for very poor credit profiles may be partly explained by the intervention of various funding schemes.

Scotland, although heavily exposed to very poor credit profiles, shows relatively better performance metrics than England and Wales. Its average credit score (572) is significantly higher than England (547) and Wales (549). Default rates are comparable at 3.5%, but Scotland’s accept rate is much higher (60% vs. 35% in England and 30% in Wales). CCJs are notably low (6%). In Scotland, creditors typically pursue enforcement through the Sheriff Court system, using enforcement methods that do not result in CCJs.

Northern Ireland credit unions stand out as the most credit-healthy region. They have the highest average credit score (597), the largest average loan size (£7,000), and the lowest default rate (1%). Three in ten loans are to individuals with an Excellent credit profile, and 45% fall into the top two credit bands (Excellent + Good). By contrast, only 25% of lending is to borrowers with a Very Poor credit profile.

Overall, credit unions in Northern Ireland serve a wider range of borrowers, a sign of their long-term and central place in local communities. Northern Ireland employs different court procedures and a somewhat lower frequency of civil debt recovery actions through the formal courts compared to England and Wales.

Individuals in this group have credit scores of 627 or above, no recent defaults or CCJs, and consistently meet credit obligations. They typically have stable income, low credit card usage, and are granted higher-value loans with very low default rates.

For decisioning focus on:

This segment features borrowers with scores between 603–626, often homeowners or long-term residents with stable employment and clean repayment histories, though they may have minor missed payments. They present low risk, receive moderate-to-high loan amounts, and have strong acceptance rates.

For decisioning focus on:

Fair borrowers have scores ranging from 565–602 and may have recent but not severe payment issues, such as more than two missed payments. They often have moderate incomes, higher credit card use, and are accepted at reasonable rates, though with a higher default risk than those in the good or excellent categories.

For decisioning focus on:

Scoring between 560–564, these individuals have often experienced recent defaults and may have CCJs or other adverse indicators, including insolvency. Income is generally lower, and they are approved for smaller loans with payment protections in place such as Child Benefit.

For decisioning focus on:

With scores below 560, this group comprises the highest-risk borrowers, many with multiple defaults, CCJs, and heavy credit card dependency. Despite lower average incomes and high default rates, they still make up a large share of lending activity, particularly among credit unions focused on financial inclusion.

For decisioning focus on:

For a detailed view of what is driving bad debt in your Credit Union, contact us about a Lending Risk Insight Report.