TransUnion, one of the United States’s three major credit reporting agencies, announced recently that they’ve updated their policies and will be allowing cryptocurrency lenders to check credit scores. Cryptocurrency is an alternative to traditional fiat currencies like the United States Dollar or the Mexican Peso. Examples of cryptocurrencies include Bitcoin, Litecoin, and Ethereum, among many others. For more information or to buy crypto for yourself, please visit Okx.com
According to a report in the Wall Street Journal, TransUnion’s decision will allow platforms that loan cryptocurrency to provide better interest rates to their clients, as a credit history will give the lender a better idea of the applicant’s credit history, risk tolerance, and ability to repay the loan within the timeframe indicated.
Another benefit of TransUnion’s decision is that viewing a client’s credit history will allow loan seekers with a high credit score to more easily get crypto loans without having to provide collateral. At present, almost all crypto lenders require a digital asset such as Bitcoin to be used as collateral before receiving a loan, which can make it difficult for prospective first-time or over-leveraged loan recipients to receive loans.
TransUnion is offering the service through Spring Labs’ ky0x digital passport program. After a lender requests the information from TransUnion, the information can be placed in a digital passport that is publicly available on the blockchain. This means loan requesters will only have to go through the process once every couple of years at most, unless their score drastically improves and repeating the process would result in lower interest rates for future loans.
Steve Chaouki, President of US Markets and Consumer Interactive President for TransUnion, stated in a press release, “We believe in the growth potential of DeFi.” DeFi is short for decentralized finance, a type of finance that does not rely on brokerages or banks for backing and is a term often used to refer to cryptocurrencies and related fields. “Providing credit and identity data on-chain is a huge step towards improving the financial products available in the space.”
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In addition to providing credit data, the digital passport also allows legally required data to be tied to a user’s account and can not only save time for the consumer but for lenders and other platforms as well. In the United States, for example, anti-money laundering legislation (such as The Patriot Act) and other banking regulations require that cryptocurrency purchasers prove their identities and pay taxes on any gains made by selling. With this information all in one place, the crypto buying process will become streamlined and easier for all involved.
With the program now underway, consumers can go out and have their TransUnion credit report sent to crypto lenders today. With digital passports getting a big boost through their use by the NFT sector, it’s a great time for cryptocurrency enthusiasts to apply for a credit check through a lender and start receiving crypto loans for a variety of purposes. If their credit score is high enough, they may not even have to put down collateral.