Credit bureau giant TransUnion begins providing credit scores for crypto lending

TransUnion, one of the big three credit bureaus in the US, will provide credit scores for decentralized finance (DeFi) lenders, the firm announced Thursday.

TransUnion will provide traditional (off-chain) credit scores for individuals when applying for loans on blockchain-based protocols without compromising applicants’ privacy, according to the press release.

The firm is teaming up with data security firm Spring Labs and DeFi identity and compliance software developer Quadrata to deliver the service.

Last year’s brutal crypto bear market led to a wave of defaults on unsecured crypto loans. The trend highlighted the fragility of unsecured lending in the digital asset market, Walter Teng, vice president of digital assets at market research firm Fundstrat, said in a report. Teng added that credit scores for crypto borrowers could have cushioned the losses.

In a press release, Jason Laky, executive vice president of financial services at TransUnion, said that “credit scoring is an important tool for lenders to mitigate risk regardless of the platform used.

TransUnion’s credit scoring allows consumers to use their credit history and share their credit information securely with any blockchain-based lending protocol, while helping lenders improve decision-making and risk management, Laky explained.

Loan applicants can request credit scores from TransUnion, delivered directly to consumers via Spring Labs with snippets of information that are then shared with lenders.

“As more consumers and lenders move to blockchain to conduct business, it is important to ensure that the balance is between the information that lenders need to assess risk and the privacy and anonymity expected of users of the technology,” John Sun, CEO. from Spring Labs, said.

TransUnion’s latest effort is part of a larger trend in which traditional financial (TradFi) services and crypto markets have become more intertwined as TradFi firms explore ways to use blockchain technology and their foothold in traditional markets to serve crypto investors.

Last year, rival credit bureau giant Equifax partnered with Oasis Labs to develop identity management and know-your-customer (KYC) compliance for blockchain firms. Another competitor, Equifax, has partnered with decentralized lending platform Credefi for green corporate scoring for businesses in the EU.

The latest development follows TransUnion and Spring Labs’ introduction in October of a privacy-focused data-sharing service called TrueZero. The service allows financial institutions to send information, such as credit data, without revealing sensitive personal data. TransUnion is also an investor in Spring Labs.