Owning your Data — Credit scores

One of the core topics emerging through a number of startups leveraging Blockchain technology is the concept of us owning and controlling access to our personal data, a shift away from data stored on central servers to a decentralized model.

I have often said that if you are not paying for the product then you are the product, and when you consider how accessible analytics and automated marketing tools have become I assure you targeted marketing has no plans to slow down. Putting aside the monetization of your data, I believe that security will be the main driver for change. When you consider the data breaches in 2017 alone (143 million US-based users had their personal information compromised this year including Social Security Numbers) the argument for decentralized data is very strong.

This post takes a look at Credit Scores, the way we provide information to the organizations like FICO that provide these assessments, and how blockchain and peer-to-peer attestation could change the way we look at lending.

As someone who relocated from the UK to the USA a few years back I needed to go through the process of opening a bank account, applying for a credit card and leasing a car all within the space of a few weeks. I filled in a lot of paper forms and shared a lot of personal information. My assigned credit score was based on my history of debt in the USA not my ability to repay, and particularly relevant to me, my credit score from the UK was not considered important.

One of the golden rules of security is provide only the information you need to provide. When completing an application form you may be asked “How long have you have lived at your current address?” or “What is your total income?”. The lender most likely only needs to know the answers to the questions “Have you lived at your current address for more than 5 years?” and “Is your income greater than x?” — the second set of questions being a simple “Yes” or “No” answer where no data is shared. By holding your data, and establishing a relationship with external verifiers, you could provide the information required to a third party without your data being shared and recorded in yet another database. If your data is not recorded then you remove the risk of it being compromised.

Blockchain could also help address some of the challenges of portability, something the industry needs to take seriously. I had a perfect credit score in the UK, but when I arrived in the USA Macys would not even provide me with a store card. My teenage son had the same credit rating I did. I needed to start from the beginning and build my credit score all over again. It’s also about time the industry looked with fresh eyes at how credit scores actually work. With today’s system, someone with cash in the bank and who uses a debit card every day most likely has a lower score than the guy with debt spread across 5 credit cards, 3 store cards and two auto loans.

One of the companies that caught my attention recently is a startup called Bloom (http://hellobloom.io) founded by Ryan Faber, John Backus, Jesse Leimgruber and Alain Meier. John, Alain and Jesse met while studying at Stanford and were founding research scientists for the Stanford Bitcoin Group.

This is Blooms elevator pitch — “Bloom is an end-to-end protocol for identity attestation, risk assessment and credit scoring, entirely on the blockchain. Bloom allows both traditional and digital currency lenders to serve billions of people who currently cannot obtain a bank account or credit score.”

Bloom have proposed a fresh approach built around three core components:

  • BloomID lets users establish a global, federated identity with independent third parties who publicly vouch for their identity information and legal status.
  • BloomIQ is a system for reporting and tracking current and historical debt obligations that are tied to a user’s BloomID.
  • BloomScore is a dynamic and inclusive indicator of an individual’s likelihood to pay debts that adapts to the maturity of a user’s credit history.

A global federated identity is something I talked about briefly in a previous post. We all need to establish digital verified identities, we need to become known and trusted individuals online. Too many platform require little more than an email address to create an account and an online persona.

Whats great about Blooms solution is that a users friends and family can vouch for them and their ability to act responsibly, as well as attesting to key pieces of data such as Date of birth. This type of peer-to-peer attestation, where by the person vouching for an individual puts his own rating on the line, is based on the idea that our network reflects our behavior. A trust model could provide significant benefit to the millions of Americans who are invisible to organizations like FICO, those relocating to new countries, or those simply starting out. It also has the potential to help business expand and establish relationships with new customers in emerging markets.

If Bloom are successful and launch their planned ‘BloomCard’ as the first Blockchain Credit Card I am sure we will hear a lot more about them.

#DigitalTown #Blockchain #Bloom