Prosper Lending: ScoreX Plus
Posted by Peer-Lend on March 27th, 2007
- Prosper.com uses a proprietary & predictive credit scoring model called Experian ScoreX PLUS(sm) to calculate borrower credit scores. Prosper then assigns a letter grade based upon specific score ranges.
- While the score ranges may look similar to FICO(tm) scores, they are not FICO(tm) scores.
- As ScoreX is a predictive model, the credit grade that borrowers are assigned by Prosper (based upon the numeric ScoreX score) may differ considerably (sometimes better than you might think appropriate – sometimes worse than you might think appropriate) from the credit grade that would be assigned if a more traditional FICO(tm) or FICO-like scoring product were employed.
- ScoreX is built for assessing risk for new accounts on different types of existing credit products. Prosper loans are a new credit product, and one which has little in common with several of the types of data included in the sample that the ScoreX model uses for prediction.
- Of the types of credit products that the ScoreX sample consists of (auto finance loans, mortgages, home equity lines, and credit cards), many are credit products that are secured by real property – whereas Prosper loans are unsecured.
- The same caveats about “credit qualification” that apply to the Experian default projections also apply to the ScoreX model: The sample consists of the performance of borrowers who were approved for new accounts on traditional banking products. Many Prosper borrowers in the mid to lower credit grades would not qualify for traditional bank or credit card products, and so correlation (and therefore predictive ability) seems to decline sharply as credit quality falls.
- After close observation of ScoreX over the last year, it is at least clear that the majority of the same factors that would lower your traditional credit score also affect your ScoreX score – though perhaps not to the same degree. For example, DTI and utilization of available credit seem to be more heavily weighted in the ScoreX model, as does length of credit history.
