At Lenmo, we want to be sure that we are providing investors with as much information as possible to make informed decisions about which loans to fund and interest rate to offer. You will notice when you’re reviewing a borrower’s profile, they will have a color assigned to them:
- Green = Low Risk
- Yellow = Medium Risk
- Red = High Risk
The risk level is determined by the user’s Lenmo score:
- Green = Lenmo score of 70-100
- Yellow = Lenmo score of 60-69
- Red = Lenmo score of 59 or less
How is a borrower’s Lenmo score calculated?
A borrower’s Lenmo score consists of many factors. To ensure ultimate transparency, none of the information is self-reported by the user. All the data is provided by our trusted credit bureau partner, TransUnion. So, what goes into a Lenmo score?
- Loan Affordability (also known as the debt-to-income ratio)
This ratio is calculated by dividing the monthly loan payment requested by the monthly gross income. This ratio tells us how well the borrower can manage monthly payments given their income and the other debts that they currently have owing.
- Credit Score
A credit score is a numerical expression summarizing the information contained in a credit report at a particular point in time. Scores range from 300-850:
- 760-850 = Excellent
- 670-759 = Good
- 580-669 = Fair
- 300-579 = Bad
- Lenmo History
If a borrower has previously used Lenmo, this will help improve their Lenmo score. The more loans that were paid in full and on time, the more this will help improve their Lenmo score. If any payments were late, even by a few days, this will negatively impact their score. Just as a reminder, to protect investors, if a borrower missed a payment in the past, they are no longer able to use Lenmo.
How does the Lenmo score help an investor?
The Lenmo score and the corresponding color is a great and east way to filter out risk profiles of interest.
Once that is selected, it’s time to hone in on the credit report information. Different investors tend to focus on different factors. We will go more in-depth on credit score information in our next blog post – stay tuned!
Have any questions or other topics you would like us to cover? Let us know in the comments below!