Want a loan? Here's how your phone data, utility bills can make it easier
A good credit score can help you get a loan easily. But what if you don’t have a credit score? The bank may look at your mobile connection - whether it is post-paid or pre-paid. Or whether you pay your utility bills regularly. Of if you are speaking to the same set of persons on a regular basis. These are some additional metrics that lenders today are looking at, in the absence of a traditional credit score.
According to Mayank Kachhwaha, co-founder of India Lends, a fintech company, a large number of first-time borrowers who apply for loans get rejected. “People without a loan have no credit history. As a result, they are declined by banks straightway," he says.
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In such cases, data available through social media can replace conventional information. For instance, your LinkedIn profile can be used to verify your workplace. And data from your mobile devices, such as SMS regarding your financial transactions can be matched with bank statements.
IDFC Bank recently tied up with IndiaLends to offer instant approvals for personal loans for new to credit borrowers. According to an official from IDFC Bank, “Information on a new-to-credit customer is very thin. We have to establish identity, ability to pay and intent to pay."
The customer may be asked to log in through his social media identity, which will allow the platform to access the data. Or he may be asked to log in through his bank account. The data remains only with the bank and the fintech platform.
“The information is in the joint custody of IndiaLends and IDFC Bank. It has been agreed upon that that information will not be used for anything else,’’ says the IDFC Bank official.
If your bank statement shows that you pay electricity bills regularly, it will indicate a willingness to repay. A post-paid mobile connection also shows that you are someone who is willing to enter into a contract and honour it. This too will be a plus point in the eyes of lenders.
“Sometimes people tend to overstate their income while applying for the loan. If one month’s salary slip shows a higher amount due to some tax calculation, for instance, that can be misleading. In such cases, looking into previous months’ bank statements will show the actual monthly salary,’’ says Kachhwaha.
Lenddo is another player that specialises in using non-traditional data solutions to predict customer’s behavior. “Banks use their traditional data along with our non-traditional data for three kinds of customers — New-to-credit customers, for choosing better customers and for internal customers who may have an account with the bank but no other credit relationship,’’ says Abhinav Haldia, Country Director, India, Lenddo.
What are the indications of stability? Speaking to the same set of persons on a regular basis. Then, there is a visual psychometric test that can predict behaviour. For customers who are first-time borrowers or are seeking more loans at better rates, providing this data or going through this scrutiny can to be next step for improving scores.