Assessing credit

Meera Siva Nalinakanthi V | Updated on January 17, 2018 Published on August 14, 2016

Giving loans at competitive rates, and that too quickly, requires coming up with better ways to assess the borrower’s credit risk. Thanks to credit bureaus, it has become easier for lenders to evaluate applications. Also, knowing the end goal helps lenders come up with better metrics to assess risks.

For first-time borrowers, data from alternate sources is used. Experian, for instance, is developing New to Credit scorecards by modelling look-alike portfolios. Data from e-commerce and telecom service providers is used as surrogate.

Alternate data is used by lenders in the SME segment, too. For instance, CreditMantri notes that sales on e-commerce platforms, product range or number of rides in case of Ola taxi driver are used as the primary determinants of sales/income to decide on the loan amount and terms. LendingKart, an SME lending platform, collects 2,300 variables from various sources — disclosure, private and public sources.

Other intermediaries such as Indifi Technologies assess credit using industry-specific scorecards that include the unique risks in those segments.

In non-traditional loan segment, such as housing loan for rural women, Aspire evaluates total household income, regularity of rent and utility payments and the age and education of children to determine credit worthiness.

Willingness to repay a loan is also something to consider. Arogya uses an online psychometric test to assess the borrower.

Other lenders/intermediaries use social media content also to understand the behavioural aspects of borrowers and evaluate their willingness to pay.

Published on August 14, 2016
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