Some Lenders Judge You On Much More Than Finances

By James Rufus Koren
Los Angeles Times.

All it takes is a keystroke, maybe two, to hurt your chances of borrowing money from online lender Basix.

Like a growing number of personal and small-business lenders, Basix looks at much more than your financial history when determining whether you’re likely to repay a loan.

Among thousands of factors is whether you type your name with proper capitalization or in all capital letters.

“If you fill in your name in all caps, you’re a much higher risk,” said Douglas Merrill, founder and chief executive of ZestFinance, the Hollywood parent company of Basix.

If that sounds absurd, consider the motto in big block letters on ZestFinance’s website: “All data is credit data.”

It’s a philosophy that a growing number of lenders and credit-scoring firms are living by as they use more and more data, much of it unrelated to money, to augment traditional underwriting practices.

Alternative types of credit scoring have been around for years, taking into account factors not always captured by traditional scores, such as whether borrowers pay their cellphone bills promptly. They’ve been used to assess the creditworthiness of consumers with little or no traditional credit history, including those in developing countries.

Now, a new generation of startups has developed scoring models that look at such things as what a borrower studied in college and how a restaurant rates on Yelp, and they’re using them more widely with businesses and individual borrowers with middling or even good credit.

The abundance of digital information, and the rapidly growing storage and computing power able to comb through it all, is changing industries including agriculture and health care. It should come as no surprise, then, that it’s shaking up consumer finance.

Proponents say these new methods should help borrowers get credit, just as it has helped farmers increase their yields.

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