By far the most common question people have asked me over the last few months regards the credit grades they see for listings and loans on this site. They compare the credit grade I show here with the ones they see on Prosper and they just don’t match up. For example, you might see a listing here that has an “A” credit grade, but on Prosper.com it shows it as a “C”. So what gives?
First, for those of you new to Prosper, a bit of history. About a year ago when Prosper re-launched the site after going through the SEC registration debacle, they changed the way that credit grades were calculated. Rather than simply using Experian credit score ranges to assign a credit grade, now the credit grades are calculated based on historical performance of actual Prosper loans. In addition, the minimum credit scores to qualify for a loan at all were raised significantly to combat the high default rates in the lower credit grades. So, after the rating change, a loan that was once an “A” might now be a “B” or a “C” and one that used to be an “HR” probably wouldn’t even qualify to list a loan at all anymore.
So, we now have two grading systems. The “old” system that has roughly 3 years of historical data behind it, and the “new” system that has only about 1 year of data. In the data export that Prosper provides, they continue to provide the “old” credit grades for old and new loans, but they provide the “new” credit grades only for the new loans.
That leaves me with a choice. If I stick with the old grading system, I have 4+ years of historical data to use for my reports, but the data is less useful since the credit grades don’t really map to the credit grades you are seeing on the Prosper site for new listings. On the other hand, if I switch to the new system, I only have 1 year of data to work with. With only 1 year of data, it’s really hard to draw any good conclusions about risk and default rates. So while the data would be more directly applicable to real Prosper listings, there simply isn’t enough of it to have much confidence in the statistics.
Neither choice is a very good one, but for now my choice is to stick with the old system. I know it’s confusing, but hopefully Prosper will resolve this issue by back-calculating the new credit grades for the old loans. In the meantime, I guess it is what it is, and I certainly welcome your feedback or any other ideas on how to handle this situation.
February 3rd, 2009 · 2 Comments
Internet fame is both hard to measure and fleeting. All you need to do is look at Excite.com, AltaVista or Friendster to realize that what’s hot today can quickly fade. Shortly after starting this site I started to get mentions in a few major media outlets. Wow, I thought, my 15 minutes of fame is here! Then I started to get domain typo squatters, a hallmark of any truly successful website right? Now I’ve really made it big!
Well, today I learned that I’ve joined the ranks of internet giants. That’s right, there is now what appears to be an Eric’s Credit Community themed Phishing SPAM making its way around the internet.
Here’s a snippet, forwarded to me from one of the hapless recipients:
The Data Protecting Act Reg No. (Z720923X).
Phone: (+234)-807-656-5528 (+234)-705-635-7973
Dear Customer, (XXXXX X. XXXXXX)
Thanks for your incentive response to my advert.
By way of a proper introduction, I am Mrs.Helen Eric the Sr. Director and CEO Eric’s Credit Community. Presently I own 45% of the shares in CGP(Capita Group PLC, London) a government approved Financial Institute. We are currently setting up a scheme in form of Loan acquisition to help various individuals as well as organizations who have intentions of renovating, debt consolidation, re-financing and also establishment of business outfits.I usually give out my Loans at a very affordable interest rate of 4.5% with a negotiable duration.To start with, find below is the Loan terms repayment for the loan amount requested $4,500.00 for 3 Years.
Is this a mere coincidence that somebody else would choose Eric’s Credit Community as the name for their spammy phishing front? Or have I joined the great ranks of eBay, PayPal & Bank of America as the subject of someones financial fraud ring? I’ll hold on to my delusions of grandeur and assume the latter.
For the record, of course I had absolutely nothing to do with sending these e-mails. I only learned of this recently when several people contacted me on the site about it. I am not offering loans to anyone, especially at 4.5%. I also am not paying you $1 for adding your name to the bottom of that e-mail and forwarding it to every person you know. Nor am I a nigerian prince who needs your help to get millions of dollars out of the country.
If you have received a copy of that e-mail though, please let me know via the contact form on the site. Honestly, I find myself somewhat annoyed and yet mildly entertained by this. I’d also love to hear from other webmasters out there – I expect to see these kinds of e-mails using well known company names, but is this a common thing even for smaller websites like this one?
Tags: Eric's Credit Community
Lending Club is running an exclusive promotion for Ericscc.com users to join as a lender and invest their a first loan on them. For the month of December, when you
open an account using this link [sorry, promo has expired], you will be awarded $25 to buy your first loan.
You might also see Lending Club ads on this blog and Ericscc.com. However, you will only get the $25 if you use the link above in this post.
Tags: Eric's Credit Community · Lending Club
Wow! It’s been an interesting month in the P2P lending world. After several months of being closed to new investment, Lending Club is now back in action and accepting new lending cash. They have also partnered with foliofn.com to provide a secondary market for loans, bringing some much needed liquidity to p2p lending. Almost simultaneously Prosper.com has entered their quiet period as a prerequisite to opening their own secondary lending market.
Several people have asked me how long the quiet period at Prosper will last. Of course I can only speculate, but it seems like it will be at least several months. Lending Club was out for about 6 months, but I would hope Prosper’s quiet period would be significantly shorter since Lending Club has already “blazed the trail” so to speak.
While I’m disappointed to see Prosper close down for an extended period of time, this quiet period is good news in several ways as well. First, by taking the risk of closing down for several months (with very little revenue coming in during that time) Prosper is showing that they fully intend to stick around. This is a necessary but painful investment in the future of their platform and the fact that they are making it shows that they are in it for the long haul. Second, when the secondary market opens, it will likely bring in more lending cash from people who weren’t so thrilled with the idea of having their money locked up for 3 years. It will also allow those current lenders who want to “get out” a means to do so. Finally, on a personal note, it’ll give me some time to catch up on things, and hopefully get some work done on lendingclubstats.com as well
Tags: Lending Club · P2P Lending · Prosper Lending
October 1st, 2008 · 1 Comment
After much waiting and a few false starts, loanio (a new p2p lending outfit) has finally launched. This is something that I’m especially excited about as I have been consulting with Loanio CEO Michael Solomon about the site for going on two years now. It’s great to see this finally come to fruition.
There are a few new features on Loanio that I really like. The Co-Borrower feature allows borrowers to add a co-signer to their loan. For lower credit borrowers, who have access to a co signer with better credit, this can give them a much better chance of funding, and hopefully less risk for the lenders as well. Another feature on Loanio is the “partial funding” feature that allows a borrower to accept a loan even if it doesn’t get fully funded (subject to a minimum of 35% funded). This should help many kinds of borrowers (especially consolidation type loans where something is better than nothing) and reduce the frustration caused by re-listing. It should hopefully help lenders as well by getting their funds in play quickly with fewer bid refunds due to unfunded listings.
Loanio is still a brand new platform and missing some of the things I’ve gotten used to on Prosper (e.g. portfolio plans). I know many of those features are currently in development (as well as some very cool brand new things..) and should come on line once they are ready for prime-time.
Looks like they are having some launch-day website hiccups as well.. I’m told to try using “https://www.loanio.com” rather than the regular “http” version and it should work.
Tags: P2P Lending
September 16th, 2008 · 9 Comments
I was informed this morning by an astute reader that Prosper.com has discontinued lending for Pennsylvania based lenders. Seems like there’s quite a bit of buzz flying around about this. Here’s the official e-mail that was sent out to lenders (Thanks to Tony for sending this to me!)
We are writing to inform you that we have made the decision to discontinue accepting new lender registrations, and new bids from existing lenders, from residents from the Commonwealth of Pennsylvania. Our decision to make this change was based on our ongoing discussions with regulators in Pennsylvania, which led us to believe the change was necessary to comply with their current interpretation of their state regulations.
You will continue with your existing lender agreements, have your existing loans serviced, and be able to transfer funds out of your Prosper account. However, you will not be able to place new bids on listings or transfer money into your Prosper account.
This change does not affect borrowers residing in Pennsylvania, who remain free to create loan listings on Prosper.
We apologize for any inconvenience this change may have caused.
We thank you for being a member of the Prosper community. We hope to make Prosper available to lenders in Pennsylvania again soon.
You can read Prosper’s official announcement about this here along with some lively discussion… I was curious how many lenders this would effect, so here are some statistics about PA based lenders. Note that this may not be complete since I don’t have location data for every lender.
- Total Lenders From PA: 760 (296 of which have placed bids in the last 30 days)
- Total Money On Loan From PA Lenders: $1,026,354
Largest PA based Lenders:
I certainly hope that Prosper and the powers-that-be in PA get this straightened out soon.
Tags: Prosper Lending
September 4th, 2008 · 6 Comments
If you look at the lender profile screen for a lender (or many of the other lender-related reports on this site) you will set a “Total $ Loaned” figure. Several people have asked me how I arrive at that figure and why it is different than what they see at LendingStats for example. I was reminded of this recently while reading a rather scathing Prosper related post over at the Motley Fool. There they mentioned Prosper lender Fred93 as having about $800k invested at Prosper according to LendingStats. But if you look at the same lender here you’ll see that I only show him as having about $258k invested. That’s a pretty huge difference! So what gives? Which figure is correct? Well, that depends on your definition of “total amount invested”, but of course I believe my figure is the “more correct” one, and I’ll explain why.
First, here is where the $800k figure comes from: the $800k figure is the total original value of all the loans that Fred has ever made on Prosper. In other words, if you were to total up all the winning bids that Fred has ever made, you would arrive at right about $800k.
At first glace, this might seem like a reasonable figure for Fred’s total amount invested. However, the problem lies with the fact that this does not account for repayment of loans and re-investment of principal. The $258k figure I use on EricsCC.com does account for repayment and re-investment, and therefore should be much closer to the actual amount of money that Fred has invested.
I’ll use a simple example here to illustrate how this can make such a large difference. Lets say I transfer $1,000 into Prosper and lend it all out on one loan. At this point (according to either my site or LendingStats) I have $1,000 invested. Now, lets say that at the end of the first month, my borrower immediately decides to pay back the entire loan. So, I get my $1,000 back and re-invest it in another loan. How much money do I have invested now? I would say I still have roughly (excluding interest) $1,000 invested. However, the LendingStats figure would say I have roughly $2,000 invested. If my second borrower were to pay off their loan and I were to invest that money yet again, EricsCC.com would still show about $1,000 invested but LendingStats would now show about $3,000 invested.
Hopefully that explains where the difference in figures between these two great sites comes from. It is really just a difference in methodology. The LendingStats figures are not technically incorrect, but I do think they are a bit misleading (and the Motley Fool article confirms this for me) in that they lead you to believe that a lender has much more money in Prosper than what they actually have invested.
Tags: Eric's Credit Community · Prosper Lending
Since I added the extended credit breakdown pie charts to the Lender screens, a number of people have asked me what those are for and if they are supposed to be a prediction of future delinquencies in that lender’s portfolio.
The three pie charts displayed there (Current Delinquencies, 7 Year Delinquencies & 10 yr Public Records) actually just an aggregation of the corresponding extended credit fields for the loans that lender has invested in. There are many different extended credit fields on a listing (number of open credit lines, credit utilization, date of first credit line, etc) but the three I show in the extended credit breakdown are generally believed by Prosper lenders to be the most significant in terms of indicating a borrower’s ability to repay. For example, Loans with no current delinquencies, no 7 year delinquencies and no public records are often referred to as “0-0-0″ loans, indicating a much better chance than average that the loan will repay.
So what is this information good for? Well, to make it simple, the more green you see in those extended credit breakdown charts, the better the portfolio is likely to do. As a matter of fact, if you look at many portfolios (my portfolio for example) you will see that the current delinquency chart looks an awful lot like the “loan breakdown by status” chart. This just shows what we should already know intuitively – those who paid their debts in the past will likely pay their debts in the future, and those who didn’t pay their debts in the past will likely not pay you either!
Tags: Eric's Credit Community · Prosper Lending
One of the most frequently asked questions I get is “Why should I register?” It’s a good question, since the benefits of registering at EricsCC.com aren’t really apparent until you actually do it. So here’s a list of some of the features that registering on this site open up to you. For the over 2,000 of you that are already registered here, you’ll want to take look at this list too and make sure you are taking advantage of all the features that are available to you!
One of the most frequently used features for registered users are lender watches. There are currently over 1,000 active lender watches on EricsCC.com. The idea behind this feature is to give you a heads-up when a lender you like bids on a listing. You simply enter the screen names of the lenders you want to watch, and you can automatically receive e-mail alerts whenever that lender bids on a listing.
Another frequently used feature available to registered users is the group watch. If you have a good group who’s listings you frequently bid on, you can watch that group and get an e-mail alert whenever a new listing from that group is posted on Prosper.com. Never miss another Ohana listing again!
The listing forums on this site provide a great place for lenders to talk about listings with other lenders or group leaders. This is especially true when loans go late. As a lender, you can opt to be notified when lenders are talking about a listing that you are a lender on. As a group leader, you can also be notified when people are talking about one of your listings.
Second Loan Notifications
One of the newest features available to registered lenders are second loan notifications. Now that Prosper is allowing borrowers to take out second (or more) loans, you might be interested in knowing when one of your borrowers is coming back for more. If they were a good borrower who paid off their loan, you might want to lend to them again. If their loan is still active, it might be an indication that things are heading south and your loan may soon be going late..
Tags: Eric's Credit Community · Prosper Lending
So I’ve finally decided to start a Blog. Every day I get questions from users of this site about how to use and interpret the data here or requests for specific bits of Prosper-related information. I hope to use this Blog as a tool to share the answers to some of these questions and better interact with you, the users of EricsCC.com.
Tags: Eric's Credit Community