Why Upstart Is Just Getting Started
Since the 1980s, the FICO score has remained the standard in determining consumer credit risk. But lending technology company Upstart Holdings (NASDAQ: UPST) uses artificial intelligence to understand better consumers' likelihood of paying back a loan than a FICO score can. By making lending smarter, here's how Upstart's platform could benefit consumers, lenders, and investors alike.
Upstart's AI uses more than 1,000 variables to judge a potential borrower's creditworthiness. The company has spent eight years training its platform with 10 million-plus data points to help banks make more profitable loans -- and the more customers use Upstart's service, the more effective it gets.
Whether Upstart is leasing its platform to banks to use in-house, or accepting loan applications directly from consumers to pass on to its partner banks, it gets more consumers approved and helps banks loan more efficiently -- a win for everyone. Upstart claims that banks can reduce their default rate by 75% while maintaining the rate at which they approve loans.
Source Fool.com
