Sunbit, a point-of-sale lending company, is using recent credit file data to underwrite borrowers without FICO scores.

Specializing in non-discretionary purchases like auto repair and medical expenses, Sunbit is trying to improve its loan terms by lending to more borrowers and creating more data points. To do this, the Los Angeles-based company is determining financial responsibility by looking at factors like how many loans customers have taken out recently, if they’ve been late on any recent bill payments and how much credit they’ve asked for over the past year, said Tamir Hazan, head of analytics. By examining this short-term credit data, the company is able to lend to people without credit scores, he noted.

“We target our underwriting to only look at the most fundamental data, which actually comes from the credit file,” Hazan said. “We don’t even look at email because we’re afraid it will be discriminatory to people with Hotmail. Our losses are similar to those who only underwrite prime customers.”

Sunbit works with merchants to provide the necessary technology and tablet to underwrite customers who elect for one of its loans. After scanning customers’ driver’s licenses, Sunbit combs through their recent credit history to determine if they are financially responsible enough to pay back the loan.

In addition to account openings and closings, bill payments and the amount of recent credit requested, Hazan said the company pays attention to the amount of credit inquiries into a customer. Customers who have been financially responsible recently might not be able to access traditional credit because past actions might have tanked their FICO score, but this data shows Sunbit if a customer is likely to pay back a short-term loan.

Customers can repay the loans, which can be as high as $5,000, in three, six or 12 payments with interest rates ranging from 9.99% to 35.99% APR. Despite the high maximum rate, CEO Arad Levertov told Bank Innovation in June that its rates beat those of payday loans.

Sunbit is aiming to create more data points by lending to as many customers as possible. Hazan said he would prefer to give out many smaller loans instead of a few larger loans because it helps Sunbit’s underwriting algorithm, which ultimately will lead to better customer loan terms. The decisioning process takes less than a minute, and he hopes the ease of application will lead to more borrowers who aren’t necessarily in a bind, which will create more authentic data than if the sample set was made up entirely of desperate borrowers willing to wait however long to receive a loan.

Sunbit was founded in 2016 and has raised $54 million to date, including a $26 million Series B round in June. The company has partnerships with more than 1,500 merchants, and its revenue is split evenly between fees from merchants and interest from customers. 

Nicholas Kiefer, a professor of economics and statistics at Cornell University, told Bank Innovation that examining short-term credit file data is a good way to reach underbanked borrowers. “This market is potentially huge,” he said via email. “Customers will not be as profitable as private banking clients, but there are a lot of people in the pool. It is a market that will grow.”