• TransUnion, one of the three major credit agencies in the U.S., will be delivering credit scores for decentralized finance (DeFi) lenders starting next week.
• The firm is teaming up with data security firm Spring Labs and DeFi identity and compliance software developer Quadrata to provide the service.
• Credit scoring allows consumers to use their credit history while helping lenders improve their decision-making process.
Credit Agency Giant TransUnion to Deliver Credit Scores for Crypto Lending
TransUnion, one of the largest credit agencies in the U.S., will off-chain credit scores for blockchain-based loan applications in a way that maintains the privacy of consumers starting next week. The firm is partnering with data security firm Spring Labs and DeFi identity and compliance software developer Quadrata to provide the service which allows consumers to use their credit history while helping lenders improve their decision-making process.
Crypto Bear Market Led to Wave of Defaults
Last year’s brutal crypto bear market led to a wave of defaults on unsecured crypto loans, highlighting the fragility of unsecured lending in the digital asset market according to Walter Teng, vice president of digital assets of market research firm Fundstrat. He added that credit scores for crypto borrowers could have mitigated these losses.
Benefits of Off-Chain Credit Scores
Off-chain credit scores allow individuals when they apply for loans on blockchain-based protocols without compromising applicants’ privacy as traditional (off-chain) credit scores are provided by TransUnion. This also helps lenders mitigate risk regardless of the platform being used as Jason Laky, executive vice president of financial services at TransUnion stated “credit scoring is an important tool for lenders”.
How it Works
The off-chain scores are generated through an API integration between Quadrata’s identity verification platform and Spring Labs’ secure data network using an existing connection with TransUnion’s shared access interface known as Data Exchange Solutions (DES). This creates a secure connection that allows users to share personal information without revealing it publicly or giving control over it to any single party involved in order to maintain privacy when applying for loans on blockchain protocols.
TransUnion is providing a valuable service by offering off-chain credit scoring solutions which can help reduce risks associated with unsecured crypto lending while preserving user privacy when applying for loans on blockchain protocols