Lending Club’s Approval Process: A Peek Behind the Curtain
Perhaps the biggest question people have about online lenders is how they determine who will be a good borrower. Since FinTech companies like Lending Club never actually meet their borrowers face to face, they must rely on their application process, algorithms, and other factors to decide if a borrower should be approved and what their interest rate should be. While typical indicators such as credit score and history play a major part in the process, Business Insider recently highlighted some of the less obvious signals Lending Club looks at when evaluating a borrower loan application.
To start according to Lending Club’s CEO Renaud Laplanche, the company factors in the time it takes for a borrower to complete the application. This is because if a form is filled out too quickly, it was likely done by a bot and not a human. Speaking of time, borrowers who fill out their application at odd hours of the night may be deemed a higher risk than someone who applies during normal business hours.
Another interesting factor Laplanche revealed is that what browser and email service a borrower uses can affect your approval status. Unfortunately he declined to elaborate on just which services were deemed positive attributes and which were negative.
Lending Club is not alone in these types of ratings. An executive for a different online lending company told Business Insider that their company found that applicants who used all caps were more likely to default on their loan.
When it comes to small business loans Lending Club also has some unique ways of evaluating those applications. For example, the company may look at data from Google search trends to determine a business’ credit-worthiness. Additionally they may check out Yelp reviews as part of their research.
Obviously these are all small parts of what goes into Lending Club’s final decision. In fact Laplache not only said that the company looks at hundreds of factors, but that they also build a new underwriting model every six months or so. Still it’s interesting to see what discoveries Lending Club’s tech can make about the finances of their applicants.