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Giving Scoreless Consumers A Boost

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EFL Global has developed a new method to help "unscorable" consumers get access to credit services.
Centurion Payments
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For the average person, buying a house or a car means getting a loan. That process involves a lender looking at a borrower’s credit score – which uses an individual’s past payment history to help lenders determine how likely it is that they’ll be paid back. But no credit history can mean no loan.

That’s the reality for one in ten Americans, as well as millions of consumers outside the U.S., who don’t have credit scores either because the information for them on file is incomplete or because they haven’t had access to institutions that formally collect information about consumer habits.

A company called EFL Global is trying to help these “unscorable” consumers take advantage of the credit options that are available to everyone else. The company has developed a new scoring method that uses psychometric testing – a way of measuring a person’s personality, preferences, decision making to assess individuals.

DJ DiDonna is the co-founder and chief strategy officer at EFL. He says that they’ve done research on almost a million assessments and over a billion dollars in lending at Harvard University, and found that psychometric testing does predict risk.

“We use non-traditional data to understand  – Are people optimistic? Are they honest? Will they be likely to repay a loan?” DiDonna says, “and use that as quantifiable information to make banks extend credit.”

Sample questions include:

What percentage of businesses do you think are honest within your community?

Would you prefer $500 today, or $1000 in two months?

EFL has partnered up with the credit-ratings company FICO to incorporate their methods into an electronic banking application that also measures how people answer the questions.

Imagine you’re out an application for credit, DiDonna says. “It’s asking you what your business revenues are. You hesitate, you write it down, you erase it and the next time you write it down, it’s larger.” Capturing all that information helps them fully understand the person that’s applying for a loan.

EFL’s goal, DiDonna says, is to help small and mid-sized businesses in developing economies around the world get access to loans that will help them drive economic growth.  Here in the U.S., their scoring method seeks to provide a boost to struggling enterprises by offering banks a different way to assess risk and potentially extend loans where they wouldn’t have otherwise. 

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