TransUnion, one of the largest credit agencies in the U.S., will provide off-chain credit scores for blockchain-based loan applications in a way that maintains the privacy of consumers.
TransUnion, one of the three major credit bureaus in the United States, said on Thursday that it will provide credit ratings to decentralized financing (DeFi) lenders.
According to the press release, TransUnion will give traditional (off-chain) credit ratings to individuals who apply for loans using blockchain-based protocols without jeopardizing applicants’ privacy. To deliver the service, the company is collaborating with data security provider Spring Labs and DeFi identification and compliance software vendor Quadrata.
TransUnion’s senior vice president of financial services, Jason Laky, stated in a news release that credit scoring is an important tool for lenders to help mitigate risk regardless of the platform being used.
TransUnion’s credit score enables customers to leverage their credit history and securely communicate their credit information with any blockchain-based lending protocol, while also assisting lenders in improving their decision-making and risk management, according to Laky.
TransUnion Creating Solutions for Unsecured Crypto Loans
The devastating crypto bear market of last year resulted in a surge of defaults on unsecured crypto loans. According to Walter Teng, vice president of digital assets at market research firm Fundstrat, the pattern underlined the vulnerability of unsecured lending in the digital asset market. Teng also stated that credit scores for crypto borrowers may have reduced losses.
Loan applicants can obtain their TransUnion credit score, which is supplied directly to customers via Spring Labs and abridged information is then shared with the lender.
“As more consumers and lenders move to blockchain to conduct business, it’s important to ensure that the balance is struck between the information that lenders need to assess risk and the privacy and anonymity expected by users of the technology.”John Sun, chief executive officer of Spring Labs, said.