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Quality Loan Listings On Prosper.com

by Kirk Inglis on 08/11/09

One of the early trends we are seeing in the marketplace since re-launch is a dramatic improvement in the quality of listings.

• The average credit score of listings on the site improved from 584 in early October 2008 to 711 in the first two weeks since re-launch.

• 16% of the listings have a Prosper Rating of AA to B, versus 3% of the listing qualifying for these ratings in October 2008.

There are a few reasons for the shift in quality. First, Prosper increased the minimum credit score required to post a listing from 520 to 640. This has reduced the number of listings with subprime credit scores. In addition, the credit crisis has significantly reduced the sources of credit for consumers, even those with excellent credit scores. Quality borrowers are finding they get competitive rates, transparent loan terms and a simple application process when they choose Prosper.

Combine the better quality listings with Prosper’s best-inclass rating system and Prosper’s auction pricing and it is easier than ever to make great returns from a well diversified portfolio of Prosper loans. Prosper’s rating system is based on the performance of 29,000 loans, in addition to national credit bureau data. Prosper is the only peer to peer lending site that permits lenders to set the minimum acceptable interest rate for listings on which they bid, rather than relying on a black box pricing model.

If you’re considering becoming a lender, now is the time.

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9 Responses

Mark | August 13th, 2009 at 12:17 pm

Why are you using this Experian proprietary score that nobody else uses, as opposed to the widely used FICO? At the very least, you should tell the readers that this is NOT FICO, and that a 711 score here corresponds to a lower FICO.

NewHorizon | August 13th, 2009 at 3:54 pm

This brings to mind a few Prosper group leaders who’ve also touted restricted criteria and “quality borrowers” in their groups.

Here’s hoping the future will be kinder to Prosper than history was to the Prosper groups.

Prosper Blog | August 14th, 2009 at 1:08 pm

It is true that Experian ScoreEx plus and FICO will vary for individual borrowers. But an Experian ScoreEx plus score is not necessarily higher than a FICO score in all instances. In addition, they are both an ordinal ranking of borrower risk, and any score in isolation has limited value. By combining a credit score, other relevant credit attributes, and the historical performance of 29,000 loans, Prosper’s rating system provides an estimated loss rate for listings. What is generally more important to consumer lenders is how information about a borrower (including credit score) is translated into an estimated loss rate, not their nominal score. The most critical aspect of this translation is the use of robust historical data, which is unique to Prosper in the peer to peer lending space.

Because FICO is a more universally recognized score to borrowers, we may consider moving to a FICO-based score in the future. However, even if we made that change, it would not affect the rating that a given listing is assigned, as Prosper ratings are based on estimated loss rate, not score.

We believe a score migration from 584 to 711 is a significant shift in quality and the point Kirk was making in the blog is correct. Keep in mind that having data is beneficial if you know what it means and how to use it. Thanks for your comment.

Anders | August 27th, 2009 at 9:08 am

Historically, over 40% of Prosper.com loans went into default. (source: http://fred93blog.blogspot.com/ ) Do you expect the delinquency rate to move significantly enough by just moving from a 520 to a 640 minimum credit score?

Tom Driscoll | September 16th, 2009 at 12:47 am

give it a shot

Carmen Samaras | September 16th, 2009 at 6:22 pm

Can you tell me how hard it is to get ba loan for cosmetic surgery? My husband left me with bad credit and now I need extensive work done on my teeth, I work but need a loan to pay for the work. Also important how much is the interest rate?

Mike Tempel | September 17th, 2009 at 12:23 pm

I have a 760 FICO score, own a home and two apartment commuties and have never paid a bill late in my life. I also have a large amount in savings and investments (including notes from Prosper).

When I tried to apply for another loan to see how the process worked after the reconstruction of qualifications etc…..I was listed as HR!!!!

I found this significantly insulting especially since I have never paid the current loan I have with Prosper late and actually paid it down by 1/2 at a very low 5.5% rate (right around there).

I screen applicants applying for housing in my managed portfolio of over 1000 apartment units and in the course of 10 years do think moving the credit score to 600+ will make a significant difference. When we have a skip or a default it is 95% in the 530-580 range. I can only think of 3 600 plus FICO scores that defaulted and they were very unique situations.

Back to my original concern….how in the heck am I HR???

JOHN | September 22nd, 2009 at 8:29 pm


Rebecca Jones | September 29th, 2009 at 2:50 pm

I opened an Overhead Door Business in Southern Ohio about 6 months ago. I am struggling due to not so perfect credit from 5 years ago when I went through a divorce. I have rebuilt my credit some, but I need to get a loan for my business. I have contracts with Ohio Dept. of Transportation (which has 99 doors), 6 Fire Departments, Watercraft Police in Portsmouth Oh, do work for Tri-America, State Highway Patrol Dept., and more business. I have sold hundreds of overhead door to many residential customer. I also install for Lowe’s Store. These business have 30 day pay-out , so I have to spot these companies, and its killing me. I need to hire more installers and have more stock on hand. I need help getting a person loan to help cushion me. Any help out there!!!!!

posted in Featured,Lenders,Prosper News 9 comments »

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