Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: Polonius on October 26, 2012, 11:11:55 PM

Title: Credit lines and loan risk
Post by: Polonius on October 26, 2012, 11:11:55 PM
Hi, new forum member and LC investor here,

One thing I have not seen discussed much in this or in any other forum is the number of credit lines a borrower has.  When evaluating a loan for investment I look to see how many open credit lines the borrower has and how many in total.  If more than 50% are in use (open) that is a caution flag for me and more than 75% is no go--I won't invest.  I have seen some loans where EVERY single credit line was open.  I figure that if the borrower has a lot of open credit lines they are, or at least potentially could be, overextended credit-wise.

However, I have also noticed that several loans that I discarded according to this formula were being funded much more rapidly than other loans which did meet my criteria, despite similar interest rates.  Is the number of open credit lines versus total credit lines a meaningful value or is it more noise than signal?
Title: Re: Credit lines and loan risk
Post by: AnilG on October 26, 2012, 11:51:16 PM
I haven't done the analysis of ratio of open_acc to total_acc. But as a frame of reference, in PeerCube http://www.peercube.com (http://www.peercube.com) BLE Risk Index, these parameters account for 2 - 5% of the total risk and contribution of these parameters to Risk Index somewhat declines (some irregular exceptions) with increasing number of open_acc and total_acc.