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.

Julian Gay
Julian Gay
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.