Education

Understanding Onchain Credit Scores: A Complete Guide

Learn how onchain credit scores work, what factors influence them, and how they're transforming DeFi lending by enabling better risk assessment.

C
Cred Team
Cred Protocol
March 15, 2023
6 min read

What is an Onchain Credit Score?

An onchain credit score is a numerical representation of a wallet's creditworthiness, calculated entirely from blockchain data. Unlike traditional credit scores that rely on centralized databases and personal information, onchain scores are:

  • Transparent - Anyone can understand how they're calculated
  • Permissionless - No identity verification required
  • Real-time - Updated with every new block

How Cred Protocol Calculates Scores

Our scoring model analyzes multiple factors across a wallet's history:

1. Borrowing Behavior (40% weight)

  • Loan repayment history
  • Liquidation events
  • Debt-to-collateral ratios
  • Borrowing patterns

2. Asset Management (30% weight)

  • Portfolio diversification
  • Asset stability
  • Token holding duration
  • DeFi protocol usage

3. Transaction History (20% weight)

  • Account age
  • Transaction volume
  • Interaction with protocols
  • Gas management

4. Identity Signals (10% weight)

  • ENS ownership
  • POAPs and attestations
  • DAO participation
  • Gitcoin Passport

Score Ranges

RangeClassificationInterpretation
800-1000ExcellentVery low risk
700-799Very GoodLow risk
600-699GoodModerate risk
500-599FairHigher risk
300-499LowHighest risk

Use Cases

Onchain credit scores enable:

  1. Under-collateralized lending - Reduce collateral requirements for high-score borrowers
  2. Risk-based pricing - Offer better rates to creditworthy users
  3. Access control - Gate features based on trust level
  4. Insurance - Price coverage based on risk profile

Getting Your Score

You can check your Cred Score for free at credprotocol.com/score. No sign-up required—just connect your wallet!

Ready to integrate credit scoring?

Start building with Cred Protocol today. Free sandbox access included.