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Credit Scores Are Not Credit Stories


When you look at a credit score, what do you see? FICO scores are just part of a person’s entire credit story, and the reasons why a borrower is not quite prime have a big impact on whether that person is a true credit risk.

Why the Near-Prime Credit Market is Hot

The people at LendingPoint see a story and have based their business model on leveraging data and technology to bring efficiency to the near-prime consumer lending space. Think of it as a balance sheet lender for the modern world, where 1 in 20 applications are 1099s and the gig economy includes people from millennials to retirees.

Juan Tavares, chief strategy officer at LendingPoint, said they have developed an algorithm that is “FICO-agnostic.” This allows the company to look at the story behind the FICO score and get a better picture of who they are lending to without basing decisions solely on a number. It’s a great model to look at because many alternative lenders focus on the sub-prime space whereas LendingPoint hones in on the near-prime.

“When someone applies, we tease out certain information through the application process,” Tavares said. “With seven pieces of information, I can generate loan offers from my own products, customized to the consumer. We start with the consumer first.”

Banks look at scores of 700 and above. Non-traditional lending looks at 660 and above. LendingPoint’s focus is on consumers who score 600-675. They focus on credit capacity, character, and score by evaluating identity, income, and borrower intent.

“We solve for fraud first,” Tavares said. “Then we’ve got sensibilities that predict whether someone will be more apt to write off payment. We’ll access whether they are paying personal bills, phone, etc. We have proprietary analytics that let us look at information by thin slicing and multiple dimensions with multivariate models.”

By serving customers overlooked in the near-prime space, they target a not-so-broad audience, but can work with the borrower to increase their FICO score from near-prime to prime. People who are new to credit, retiring to serve as a consultant, or living in a multi-generational household might have the same score, but they don’t have the same story, Tavares said. The reasons for their scores are different, and that means something.

The LendingPoint Story, From Upstart to 80 Full-Time Employees

LendingPoint was started in January 2015 with a mission to revolutionize access to credit by understanding the voice of the near-prime consumer.

“We began with founders’ equity,” Tavares said. “Then we went to friends and family. By getting people to believe in the team, we raised $80 million without crowdfunding. Now, we are in a position to hit profit this year.”

LendingPoint has originated $200 million in loans in 13 states and is about to roll out nationwide. There are close to 40 million consumers in the near-prime market ready for someone to focus solely on them.

“We have 120 partners online,” Tavares said, “and B2B on the back end. It really is customer-centric. With credit fundamentals like income verification, we can be flexible in approaching how we see credit stories and pivot quickly. Predictive credit models create value for consumers and investors. When in alignment, it unlocks potential for growth.”


Written by Nicki Jacoby.


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