How Trust Science’s credit reporting technology helps serve the underbanked
This article was originally posted by the Globe and Mail here:
Trust Science gives lenders a more accurate credit score for underbanked and "credit invisible" borrowers. People who used to get wrongly scored can now qualify for loans to buy goods such as vehicles. SERPACHRYSLER.CA
After years of in-depth development of a highly complex and powerful platform, credit reporting agency Trust Science is taking off – and lifting untold millions out of sub-prime lending status along the way.
Evan Chrapko, Trust Science’s founder, chairman and chief executive officer, says he created the company to address a flaw in how credit bureaus generally assess a person’s loan eligibility.
Mr. Chrapko notes that most credit scores are based on a person’s borrowing history – but a history can’t be built without first securing a loan.
The result is a system that prioritizes those who are least likely to need a loan and widely ignores the rest, he says, particularly young people, newcomers and those from marginalized communities.
“About 40 per cent of those people are wrongly assessed as being sub-prime,” Mr. Chrapko says. “It’s not just the credit bureaus not scoring properly; it’s the banks and the consumer finance companies who are not even making credit offers to people who could use the money and would happily repay it on time.”
Mr. Chrapko began tinkering with ways to better assess loan eligibility back in 2006, supporting what was then a part-time endeavour with proceeds from successful prior ventures. One of those earlier ventures occupies a top spot in the pantheon of technology success stories, rocketing from zero to an exit of $811-million in just 30 months. The solution he envisioned for Trust Science required access to a lot of data and a powerful algorithm to process it, neither of which was readily available at the time.
“It may not have seemed commercially sensible in those early days,” he says, “but the mission held and drove my persistence.”
Trust Science was officially incorporated in 2010 and continued filing patent applications for nearly a decade until it finally issued its first credit score in 2018.
“When we came out of stealth, the world was ready, and we were ready,” Mr. Chrapko says.
The Edmonton-based company’s software-as-a-service product, Credit Bureau+, is now used by lenders across North America to assess customers using data that traditionally isn’t utilized by credit bureaus.
“We’re harnessing alternative data, as well as evaluating that data with way more powerful methods,” Mr. Chrapko says. “That data is much messier and much less structured, and that’s why there was no option but to use AI and machine learning in a legally compliant way.”
The company has secured more than 50 patents across 13 countries, with more pending. Its 2021 revenues were 12.5 times higher than the previous year, while its Credit Bureau+ platform generated 100 times as many scores. Trust Science was also recently selected as one of 200 global companies on the Real Leaders 200 Top Impact Companies List, alongside technology giants such as Microsoft Corp. and Tesla Inc.
While Trust Science is an ESG success, Mr. Chrapko says his company is just getting started. For example, it just launched a new lead sourcing/screening service for lenders’ marketers to find more deserving borrowers.
His vision in the coming years is for Trust Science’s technology to be used for other “trustworthiness” assessment applications, ranging from job screenings to online dating to fighting human trafficking.
The company also has plans to bring Credit Bureau+ to more countries worldwide, specifically targeting underserved communities.
“We have numerous stories of borrowers being scored by us, stories that will bring a tear to your eye,” Mr. Chrapko says. “These are earnest and hardworking people, but because of structural problems with a decades-old, multibillion-dollar system, they were never going to get a break. Fixing that is what keeps us going.”