The Best Credit Grade
September 29th, 2007 | ProsperI was playing around with the customization on the lender profile pages and came to the conclusion that the best credit grade to invest in is C.
How did I come up with this conclusion?
1) C credit grade of lender portfolio’s seems to return the highest ROI.
2) AA, A, B borrowers tend to have their rates bid down too low.
3) D, E, HR borrowers have their rates capped under 30%, the rates may not be high enough to compensate for default rates.
October 13th, 2007 at 7:07 pm
I don’t know how much faith to place in Prosper’s grading system. I borrowed once and was surprised to find myself a AA (my mid range FICO is 679 from the sins of my youth).
I paid the investors off quickly and made good on my note but after that I got pretty serious about quality paper, low DTI, no DQ and lending on listings requesting small amounts of money. My guess is that these fundamentals probably tell you more than the credit grade.
October 18th, 2007 at 10:15 pm
Your right, I rather have no delinquencies on a C borrower then an AA borrower with 1 delinquency.
I noticed that the credit rating puts a lot of emphasis on the # of credit lines you have and how much of that is being utilized vs. say delinquency history.