Credit scoring is a system or method used by a financial institution / bank in determining the suitability of receiving a loan from that institution. This credit rating is also a customer data that has been collected through the filling that they have done previously to submit a loan. So, it can be said that your transaction history such as proper or not bill payments or the amount of credit you have can also be said as a determinant of credit scoring.
The Importance of Knowing What Credit Scoring Is
Credit scoring is very helpful for banks or other financial institutions in analyzing credit applications in addition to other qualitative factors. At present, debtor credit report data in Indonesia can only be seen directly from Cream Bank . In this credit assessment, there are also many aspects that can be taken into consideration, such as age, marital status, number of dependents, wife / husband’s occupation, residence status, education status, position / occupation (type of work), place of work (line of business), length work at the current job (with current position), total length of work (years of service) and others.
In addition to the bank as a financial services institution that was used to apply a credit scoring system, technology financial company (fintech) Peer-to-Peer (P2P) Lending also implement the same. The P2P Lending industry has grown rapidly over the past 2 years because of the funding funding gap in Indonesia. Many businesses have not been able to get loans from banks because of inefficiencies, one of which is because collateral is needed in the form of fixed assets and difficult bureaucracy.
P2P Loan Platforms in indonesia
One of the trusted Peer-to-Peer Lending platforms in Indonesia, Lite Lenders also uses credit scoring in selecting prospective borrowers. Of course, each financial service institution, including the Accelerator, has its own credit scoring model. Acceleration puts forward three things:
- Cash flow or cash flow from prospective borrowers
- Collateral provided (can be in the form of bills from PO / SPK / Contract / Invoice, in the form of inventory, equipment, or land & buildings)
- Credit Behavior, in collaboration with thecredit bureau. Acceleration credit scoring results which will affect the amount of interest charged to prospective borrowers.
These loan ratings are also interrelated with interest rates, the higher the risk borne, the higher the yield received by the lender. In addition, the existence of collateral or without collateral also influences in determining credit scoring, because if you use a reliable collateral, the risk can be reduced compared to those without collateral.
At Acceleration we are always prudent about credit scoring to reduce the level of risk to lenders. In addition, when choosing investment opportunities, usually each investor or lender has their own preferences, but we prefer to use a diversification system. Why diversification? We will discuss further below!
Why Should Diversification?
Acceleration has lots of investment opportunities that you can choose from. Like other forms of investment, of course, investment in Acceleration is not free from risk. Acceleration has tried to minimize risk with a strict credit scoring system, but efforts to minimize risk can also be done by lenders by means of diversification.
This diversification is highly recommended because with the diversification system, we spread our capital to several types of investment opportunities, so that the risk is spread. So with the diversification system, if you have capital for an investment of $ 10 million, you can diversify into 2 or 4 investment opportunities, for example $ 5 million or $ 2.5 million. So diversify here to reduce the existing risk, if one loan is late or fails to pay, then at least you still have 3 other investment loans that pay well.
To diversify investments in Lite Lenders is very easy. In Lite Lenders, investment can start from $ 100 thousand, so you can flexibly spread your investment funds to many different investments.