A good credit score is still an important criterion for you to get a loan. But lenders don’t rely solely on your credit history any more. Many non-banking financial companies (NBFCs) have started looking at your social media profile and other parameters to decide whether or not a loan should be sanctioned to you. It also helps them effectively evaluate those borrowers who do not have a credit history, such as youngsters who have entered the job market recently.
Tata Capital is the latest to enter the alternative credit evaluation fray with is mobile app “myLoan”. Its Chief Operating Officer, Veetika Deoras, says: “For new borrowers, credit bureau data may prove insufficient for us to take a call. We are therefore looking at alternative parameters to evaluate customers.”
Many well-established banks are wary of lending to first-time customers with limited or no credit history. Many NBFCs and new banks are therefore targeting this space using innovative ways. They are tying up with financial technology start-ups for the offering. IDFC Bank, for example, recently tied up with IndiaLends to offer instant approvals for personal loans for new to credit borrowers. Tata Capital works with Credit Vidya and few others. The newer parameters also makes credit underwriting easier, which means, these lenders can easily give short-term loans, even for a tenure of one-week.
These lenders use the social media profile and mobile phone apps to cross verify the data and also profile the customers based on connections and location. When you log on to social media websites such as Facebook, LinkedIn and Google+, the apps look at the parameters such as when was your profile created, the activity on it, the friends and connections that you have, and so on. Entries in your LinkedIn profile can show lenders your education qualification, where you have studied, how frequently you have changed jobs and fields, how long you have been working for the current employer, and so on.
The data is matched against models that fintech companies already have and it gives them an estimate on your income and repayment capability. If you are vice president in an information technology companies. They can match your profile against other such VPs in IT companies and check if your salary falls in their models.
Mobile app can give lenders a lot of information, too. Depending on where you are during the day and night, they can verify your residential and office address. The phone used can also help them profile you.
“We have multiple scorecards. We match the customers’ information with them to get an idea about their credit profile,” says Deoras. Tata Capital has also introduced an option call “Vounch” in their apps. Instead of taking references, you can select up to five contacts from your phone book. The app sends them a message with a link. Your contacts can click the link to vouch for you.
Deoras explains: The idea is to make the entire process fast, seamless and paperless. The process to apply for the loan takes about five minutes and the customer immediately get offers from Tata Capital. If a person takes a loan for the first time, it gets easier to lend next time onwards. EarlySalary.com and LoanTap, for example, give loans to returning customers at a click. The money comes to their bank account is few seconds.