How High-Performance Blockchain can Improve the Credit Scoring Process

High-performance blockchain systems eliminate or reduce problems with the traditional credit scoring method and open new doors to consumer credit.

High-Performance Blockchain Technology Gives You More Control Over Your Credit History

Credit bureaus house a great deal of information about consumers. That information is valuable. That’s why the bureaus share personal credit information with financial institutions. Most of the time, these exchanges happen without consumers’ consent.

Utilizing blockchain for personal credit assessment provides consumers with the opportunity to regain ownership of their personal financial data. Consumers have the option to openly view and select the specific bits and pieces of their credit story stored on the blockchain with potential creditors.

Transactions originated on the blockchain are easily validated in a permissionless setting.

High-Performance Blockchain Credit Systems Help Marginalized Citizens

A credit scoring system built on blockchain technology makes it easier for the unbanked and underbanked to play a more active role in the business life of their local communities.

Consumers without checking and savings accounts exist outside the financial mainstream. There are also those who make some use of banks but routinely turn to other sources for their financial products and services. The unbanked and underbanked represent an untapped market.

They can’t receive traditional loans to start a business or pay for an education. They are invisible to the standard financial service providers.

A decentralized credit system allows these people who were formerly on the sidelines to participate. Creditors can easily verify the transaction history recorded on the blockchain to determine the eligibility of borrowers. In a decentralized system, alternative lenders take into consideration the small things that big lenders tend to overlook because the trustless environment offers strong verification.

High-Performance Blockchain Credit Reporting is Transparent

Traditional credit bureaus such as Experian, TransUnion, and Equifax only disclose a framework of the credit scoring methodology. It is unlikely for these centralized institutions to reveal their proprietary algorithm which creates the credit scoring model that may enable or prevent you from securing financing to purchase your dream home.

Therefore, consumers struggle to improve their credit scores. After all, it is extremely difficult to improve credit score without knowing how the credit bureaus evaluate consumers’ financial activities.

Enabling the credit scoring process on the blockchain allows consumers to have a real-time view of their credibility status. They would know immediately if and how their latest financial activity affected their credit standing.

High-Performance Blockchain is an Ideal Source for Validated Data

Data integrity is a critical factor in the traditional credit scoring process. From data origination to standardization and storage, transaction data can be easily contaminated and manipulated. Hence, the trustless setting of a highly decentralized blockchain is an ideal solution to assure data authenticity and consistency. As the ‘Don’t trust. Verify’ approach stands, it may be the best cure to the ‘Garbage in, Garbage out’ problem found in data driven assessments.

The Future of Credit Scoring

The traditional credit bureaus will maintain a major role in the world of consumer finance while applications on the blockchain continue to emerge, enabling a diverse transaction database which could contribute to building a decentralized credit system.

It’s also reasonable to expect the creation of hybrid systems utilizing the strengths of both centralized and decentralized data.

Building with NUTS

To ensure security for all traders in the open OTC market, NUTS provides an accessible, distributed ledger that secures non-standardized trading and provides the transparency needed to safeguard every transaction.

We integrate essential financial capabilities into smart contracts to create diversified technology modules, and enable open, inclusive financial processes that serve the changing needs of a digital asset class.

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