Credit Scores Come to Debt-Leery Chinese

If you want to get a loan from Gary Wang, make sure to have drapes in your living room. Because most Chinese don’t have credit scores, Wang’s China Rapid Finance, a peer-to-peer lender based in Shanghai that uses the Internet to make consumer loans, applies some unusual criteria to predict who will be a good credit risk. People with drapes, says co-founder Wang, are more likely to pay their debts.

It’s not the usual way to judge creditworthiness, but until recently many lenders in China had little choice. The People’s Bank of China, the central bank, operates a credit bureau with data on about 300 million Chinese out of 1.3 billion and shares that information only with certain banks. “If you don’t have data, you don’t know the risk profile, how to service the segment, and how to price it,” Wang says.