A start-up company is addressing the concept of alternative credit scoring through a proprietary system designed to help borrowers that are shut out of traditional credit score processes.
The Rockville, Md.-based SharedLending has developed the CORE Score—the acronym stands for Credit Optimizer and Risk Evaluation—that enables borrowers to define their creditworthiness via a 37-question survey. The survey is designed to provide an understanding of the borrower’s behavioral traits through inquiries on fiscal responsibility (“How often do you pay late fees on payments to creditors?” or “Do you set aside funds in an investment account on a regularly scheduled basis?”) and personal habits (“How many times per week do you wake up before 6am?” or “Do you walk 10,000 steps or more daily?”)
For Dileep Rajan, the company’s founder and CEO, SharedLending’s CORE Score approach is coming at a time when a growing number of creditworthy people are being denied access to funding.
“We are scoring the unscoreable,” he explained. “The Consumer Financial Protection Bureau stated there were 50 million people without credit scores. These include immigrants, Millennials and others—and many of them do not have debt. But traditional lending is not set up to accommodate them. After all, you need debt in order to have a credit score. We are offering this as a snapshot of trustworthiness for these consumers.”
Rajan added that SharedLending’s CORE Score works directly with consumers and not outside entities to determine creditworthiness. “This is incredibly radical—we are not pulling third party data for this,” he said.
However, Rajan stressed that he is not seeking to have the CORE Score elbow out other long-established credit scoring processes. “We want companies to use this as an additive to FICO, not as a replacement,” he said, noting that this solution could be used as a “pre-qualifier” for situations involving financial or housing transactions.
To test whether the “pre-qualifier” label is accurate, SharedLending recently conducted a CORE Score pilot program with Rockville Housing Enterprises, a Maryland agency that provides housing assistance to low-income families through the Section 8 and public housing programs. The result appeared to affirm the viability of the CORE Score, with SharedLending’s applicant rejection rate matching 80 percent of the agency’s applicant rejections.
Moving forward, Rajan is aiming SharedLending into the payday lending industry’s turf with a new set-up that offers $250 microloan for qualified borrowers. He is also hopeful that major lenders will recognize the value in offering greater inclusivity to borrowers that they have been overlooking.
“We can find the golden nuggets in the population that traditional scoring has ignored,” he said.
