As consumers, many of us are in the dark about our personal credit score. Sure, we can probably find it out, but how many of us would know, off the top of our heads, where on earth to start?
And it’s not just consumers that need to take a more active interest in their credit history. Personal checks are usually part and parcel of any small business owner’s finance application. In fact, having a good credit score can mean tens of thousands of dollars saved each year on borrowing costs.
In what has to be one of the greatest fintech growth marketing hacks in recent years – well in Australia anyway – personal lender SocietyOne launched a campaign in 2015 offering Australians free access to their personal credit score. Within days, 50,000 Australians had logged on to the site to claim theirs, generating millions of dollars of publicity for the company in the process.
While getting consumers engaged about their credit score has no doubt helped SocietyOne spruik their personal loans, other startups like Credit Savvy in Australia and Credit Karma in the US are helping consumers not only access their score, but shop it around multiple providers. It’s truly the beginning of a serious credit revolution.
So in the interests of firsthand research, I decided to try it out myself via Credit Savvy.
It was, as it turns out, relatively painless. After inputting a few details about myself and providing my passport number, within 2 minutes, there it was, staring back at me: my credit score.
The results however were moderately underwhelming. Turns out I’m ‘Okay’ – not ‘Good’, ‘Very Good’ or even ‘Excellent’. A terminal high achiever in other aspects of my life, I was rather disappointed in my averageness. So I dug a little deeper. And of course, it just kept getting greyer. The only real clue as to my middle of the road result were a number of credit card applications. No glaring defaults, or serious credit infringements.
So I started hunting around, for tips and tricks I could do to increase my score. Needless to say, most of the advice I found was directed at individuals with serious faults to their name. Given that wasn’t me, what next?
The next port of call was my bank. Looking at my thin credit file, it appeared there was no positive reporting regarding my timely credit card repayments. Comprehensive Credit Reporting (CCR), which documents both positive and negative information about an individual can help consumers like me drive up their score. After further investigation, it appeared neither of the major financial institutions I banked with had chosen to ‘voluntarily’ participate in Australia’s CCR regime.
After this I got a little mad. There’s so much more to me! What about my wage, my level of education, my service provider loyalty? Or my multiple income streams, hedging me against economic downturns? Surely all of this paints a very different picture of me as a borrower?
Well, it turns out more and more fintech startups agree. In fact some online lenders, like SoFi are eschewing traditional credit scores altogether, claiming they aren’t ‘a real driver of credit performance’.
Then there’s startups like Aire, who are stepping into the ‘grey’ void in an effort to try and humanise credit scoring for other companies. Aire generates its own score after assessing responses to simple questions around financial behaviour. Coupled with machine learning, the company looks to partner with companies who after trying the ‘traditional assessment route’, hit a grey zone, or ‘marginal decline’.
There seems to be an opportunity for a fintech startup to grab the bull by the horns when it comes to credit scoring. Helping people like me – who in theory could be the small business borrowers of the future – get credit score ‘fit’. What about an online lender that promised to help its borrowers do exactly that? It’s a reversal of protectionary bank think, which looks to keep its borrowers on a need to know basis when it comes to their credit score. If, heaven forbid, it might help them negotiate a little harder.