SoFi hands out loans without relying on credit score

NEW YORK-- Last February 17, SoFI co-founder Dan Macklin held a special talk sponsored by Columbia Startup Labs in Soho West. Only last month, the modern finance company that’s fueling the shift to a bankless world announced that it is handing out loans without relying on a person’s credit score.


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SoFi considers other methods to gauge who will repay a loan. It takes a detailed look at your payment history, income versus your expenses, cash flow, and your career stability.  However, it still looks into your credit report to ensure applicant has a good track record of paying bills.

For Macklin, FICO credit scores are no longer a good way of screening loan applicants--with more millennials today having “thin credit files or no credit at all.”

 

SoFi usually refinances college loans to undergraduates, graduate students and those who’ve finished college but it also provides personal loans and mortgage loans.. So far it has approved $7 billion in loans, most of which happened in 2015.

 

Looking back, Macklin remembers how SoFi was built in two months (it’s been around since 2011) with no marketing budget but lots of word-of-mouth traction.  

 

It has come a long way since getting millions to a billion dollars in funding which Macklin thinks is essential, “so we won't be constrained in our ambitions.”

 

About 50 percent of SoFi borrowers are referred by a friend, with 300 companies offering SoFi to its employees.

 

Macklin also discussed how SoFi is transforming personal finance by combining technological efficiencies with strong customer relationships. By leveraging the efficiencies of technology, SoFi provides instant decisions to meet demand.

 

Macklin advises startups to look into “better technology than incumbents but not to forget customer service. “You need both.”

 

“It has to be a clean experience. People need to be able to get answers to their questions quickly,” he said.