How reliable is the credit model?
Bondora assigns each borrower a risk rating classification at the time a loan request is processed. The rating is based on a number of factors, including credit data provided by third-party credit reporting agencies; information from public records, including bankruptcy, liens or judgments; and additional information provided by borrowers, which is, in most cases, verified by Bondora.
Data produced by third-party credit reporting agencies consists largely of information on delinquencies and addresses. Data provided by credit reporting agencies, and the information provided by prospective borrowers, may be outdated, incomplete or inaccurate. Accordingly, a Bondora-assigned borrower risk rating may not reflect a borrower’s actual creditworthiness. Bondora seeks to verify the majority of the information obtained from most borrowers, but verification may not be possible or may be inaccurate or incomplete.
Additionally, it is possible that, following the date that any credit information is received, a borrower may have defaulted on a pre-existing debt, taken on additional debt, or experienced adverse financial or life events.
Bondora’s risk rating classifications are intended to be informative only and reflect Bondora´s view of the relative creditworthiness of the borrower; the creditworthiness of a borrower cannot be guaranteed. While Bondora may update or amend borrower information or risk rating classifications at any time, it accepts no obligation to do so, including between the dates when the initial loan request is made, and the loan is issued, and during the term of any loan.
Consequently, the investor may, based on inaccurate borrower credit information, invest, directly or indirectly, in loans originated on the Bondora marketplace platform. Additionally, the interest rate for a loan may not accurately reflect its risk profile, which may lead to lower returns for the investor than might be expected for the perceived credit risk. As a result, the amount of income the investor receives may be lower or less predictable than expected with respect to the loans.
Bondora has been operating in Estonia, Finland and Spain for many years and has issued over €70 million in consumer loans. In this process, Bondora has processed over 1 billion loan applications and has analysed the data provided by potential customers. This has provided Bondora with a significant volume of data that has been used to build and streamline its credit models.