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(Kitco News) - TransUnion, one of the top consumer credit reporting agencies in the U.S., has revealed that it will start delivering credit scores to decentralized finance (DeFi) lenders beginning on Monday.
According to the press release from TransUnion, the firm has partnered with Spring Labs and Quadrata “to deliver off-chain credit scoring to DeFi and Web3 applications for the first time.”
Decentralized applications (DApps) will be able to utilize the new service to access off-chain credit data using Spring Labs technology and Quadrata, a digital passport network that was spun out from Spring Labs.
“The credit data will be provided at the request of the consumer,” TransUnion said. “This patented process, developed by Spring Labs, will enable the delivery of the credit scoring data while maintaining the privacy of the consumer’s identity on blockchain. The credit score will be delivered from TransUnion facilitated by Spring Labs technology directly to the consumer with excerpt information subsequently shared by the user with the DApp.”
This development comes at a crucial time for the crypto industry as the ongoing Operation Chokepoint 2.0 has significantly limited the number of baking partners willing to work with cryptocurrency platforms.
This has made obtaining lending for crypto-related endeavors even more challenging, but the ability for lenders to get a better read on the creditworthiness of individuals and projects may help legitimate proposals receive the funding they need.
“Credit scoring is an important tool for lenders to help mitigate risk regardless of the platform being used,” said Jason Laky, executive vice president of financial services at TransUnion. “This partnership with Spring Labs and Quadrata will allow for DeFi lenders to have access to this critical information when making their lending decisions with confidence, ultimately minimizing their risk and providing borrowers more opportunity for better terms.”
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Previously, privacy concerns had kept credit data out of the view of DeFi lenders. The combination of credit score data provided by TransUnion with Quadrata’s digital passport has created a unique avenue of lending opportunities for crypto-related consumers.
“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,” said John Sun, chief executive officer of Spring Labs. “This new product featuring TransUnion’s identity and credit data at its core is a big step toward achieving that balance and allowing more lending opportunities on blockchain while minimizing risk.”
TransUnion is not alone in its efforts to engage with the crypto market and blockchain technology. Last year, its rival Equifax partnered with Oasis Labs to develop identity management and know-your-customer (KYC) compliance for blockchain companies.
And Experian, one of the two largest credit bureaus in the world, is collaborating with the decentralized lending platform Credefi to provide Green Company scoring for firms that apply for a loan through their platform.
