A Blockchain-Based distributed network for Secure Credit Scoring

Abstract

Credit scoring is a method that is used by banks to estimate the risk of lending money to an individual. It determines the ability of that person to repay the debts. Higher the credit score, higher is the probability of getting the loan. Before approving the loan, in addition to calculating the credit score, banks also need to digitally verify the client's credentials. This is a very tedious task involving a lot of paperwork. It becomes even more cumbersome when the person is underprivileged i.e. from rural areas or does not hold any bank account. This paper presents a solution to the above problem by introducing a framework that will create a secure digital identity and store the past transactions made to calculate the credit score using blockchain. Blockchain is a digital ledger that is resistant to modifications. It creates a distributed network of users where details of each transaction are transparent, thereby enhancing the level of trust in the network. The aim of this paper is twofold: (1) providing fair and unbiased access to credit to people who are deprived of the basic financial amenities and (2) efficient digital verification.