To give lenders a more complete financial profile of would-be borrowers, Plaid has introduced a new credit scoring platform that provides an up-to-date, comprehensive view of borrower risk.
Plaid’s “LendScore” is a credit risk score that uses real-time cash flow and unique connection insights from the company’s network. It includes financial activity such as unsecured personal loans that aren’t always included in traditional credit scores.
“With nearly one million connections made daily,” the company said, its network “provides differentiated signals about a borrower's financial health that can power market-leading predictive models.”
While traditional models still matter, LendScore takes a fundamentally different approach to evaluating credit risk by leveraging cash flow insights, income patterns and financial account connections to reveal a borrower’s real-time financial story. Taken together, traditional scores and LendScore can be used to enhance credit decision-making.
The San Francisco-based financial services firm’s data transfer network powers fintech and digital financial products. It built LendScore in partnership with unsecured lenders, which helped shape the attributes the company prioritized, the structure of its reason codes, and how model performance was measured.
In testing, millions of scores were screened, delivering a 25% lift in predictive performance for lenders compared to traditional credit data alone, the company claimed. It also drove a 20% relative risk reduction for some subprime and near-prime borrowers without reducing originations.
That alone “could save personal lenders more than $1 billion in credit losses” and reduce the average annual percentage rate for borrowers by three percentage points, Plaid said.
The platform provides context to a borrower’s credit score. For example, millions of people rely on earned wage access apps to bridge the gap between paychecks and avoid overdrafts. When used occasionally, they can be a helpful financial tool. But borrowers using four or more at once are 22% more likely to default on a loan, the company found.
The Plaid Network sees nearly one million daily connections across checking, savings, investment and loan accounts. That gives its scoring model the breadth to capture a borrower’s complete financial life and the depth to analyze key signals like balance trends, income stability and recurring expenses, the company said.
All of these data points are distilled into an actionable risk score, helping lenders move from insight to decision faster.
