The experience that most of us had so far, regarding credit scoring services, referred to banking executives with arms crossed on their chests, sitting at the other side of the table, stating the non negotiable terms on which the institution they represent could finance us. Or, if we are lucky, we can get the chance to get a glimpse of the KPIs that a credit bureau utilizes to generate our credit score, where always paying on time and interacting with as many reporting service providers as possible (even unnecessary ones), is a must in order to build our credibility.
Most of the traditional credit score models were built a long time ago and are primarily based on monitoring existing credit facilities. Their rationale is based on pieces, even sometimes pixels of credit profiles. That is to say, the primary data feed for the said credit assessment models refers to static pictures of a person’s creditworthiness, e.g. outstanding debt (one maybe even two-month old data), income (static picture of the past year’s tax return or maybe the previous month’s pay slip) and so on.
Evolution in technology is tremendous and we can witness its results in many aspects of our lives. Technology in the hands of financial services has created its own life changing wave, an entire industry worth billions of dollars, aiming to develop services in order to facilitate financial wellbeing. The trend is very strong, and the European regulators stepped in to provide directives that facilitate fintech industry, in order for the latter to provide more efficient and less costly financial services to EU citizens.
Credit scoring practices and credit assessment models have been developed over the past 50 years and more. Εven if traditional credit assessment is outdated and static, it is a good start to use its basic, long-tested principles and build on top of them with the help of technology.
Now, imagine a credit score that reflects on the one hand the standard credit assessment that a traditional bank would have to undergo (hence offering you credibility in the eyes of the banking executives, given that you would be “talking” in a language that they understand) and on the other hand it would be augmented by machine learning, constantly & automatically updated based on your transactional behavior and kept into perspective via macroeconomics that refer to you. Your transactional behavior entails of course on-time payment of your financial obligations, but it is to your benefit that next generation credit score models can go a step further from analyzing existing credit and they can utilize machine learning in order to analyze and learn from your other transactions, as well. Other transactions, may include the timing of your inflows or of your bills and the type of those bills.
We, at Verge.Capital, have created a credit score model that learns from you and everything that is entailed in your everyday transactions. Your transactional behavior, along with your financial fundamentals, teach our platform and by extension the financial institution executive, on your affordability. It was about time to own your creditworthiness and be in charge of your financial wellbeing.