Your digital profile to affect credit score

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Your digital profile to affect credit score


  • Lenders are using non-financial data to make credit decisions.

  • Lenders are using the fintech model to expand their business using alternative data and arrive at a credit decision.


It is not just your older loans or credit card repayment history that is being used to decide whether you should or should not get a loan. Increasingly, alternative data-based credit scores are also being used to arrive at a lending decision, not just by fintech companies but also by banks and non-banking financial companies (NBFCs).

One of the four operational and licensed credit bureaus in the country, CRIF High Mark, recently announced a tie-up with CreditVidya, an alternative data-based credit assessment platform. Abhishek Agarwal, CEO and co-founder, CreditVidya said that over 40 lenders, including banks, NBFCs and fintech companies are currently using the company’s alternative data-based scoring model. “We have observed that our model enabled a 15% higher loan approval rate for applicants having a score from credit bureau, compared with traditional methods of underwriting. The scoring also ensures 33% lower delinquencies for the same level of risk," he said. Let us take a look at what this alternative data is and how is it being used.

Alternative data
Credit bureaus have predominantly relied on traditional data like repayment history of loans and credit cards. However, the digital footprints for consumers have gone up significantly over the past few years and fintech companies are mining that. “Digital footprints of an individual go far beyond social media data. A transactional SMS on your phone or your transactions to book a cab, order food or any other item online is also a digital footprint. Mining that data to give you a credit score is what we are doing," Agarwal said.

Not just specialised service providers like CreditVidya, even NBFCs are using the fintech model to expand their credit business using alternative data points to arrive at a credit decision. For instance, LoanTap, a fintech platform having an NBFC licence, does not consider traditional bureau scores to be sacrosanct. “We largely operate in urban geographies and most of the customers do have a credit score. But credit bureau scores are not sacrosanct for us; it is just a part of the decision-making process," said Amit Tewary, chief operating officer, LoanTap.


Regards,
CA Pankit A. Shah
Chartered Accountant

Office Address :- 
35, 4th Floor, Shree Krishna Center, 
Near Mithakhali Six road,
Navrangpura, Ahmedabad-380009.
Office Phone :- 079-4898 5464
Mobile No. :- 92272 30943

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