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 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.