Monday, April 08, 2013

Lending Club Borrower's Income Verification, Loan Issued Year, and Initial List Status

Recently Lending Club modified the historical loan data file, included several new loan and borrower attributes and removed a few. One of the new fields is whether a borrower's income was verified by Lending Club during the loan application process. Recently, there was a discussion about verified income at LendAcademy forum. Some of the questions and concerns raised during the discussion were:
  • Has the number of available loans with verified income gone down recently?
  • Does the income verification really matter with loan performance?
  • Does Lending Club verify income for all loans?
  • Which borrowers are more likely to have their income verified?
It will be interesting to find answers to some of these questions and supporting data from the new historical loan data file.

Loan Issued Year

The chart below shows the borrowers' income verification for the loans by issued year. The loans with verified income are listed as TRUE and with unverified income are listed as FALSE. Two questions listed above are right away addressed from this chart.
  • Lending Club doesn't verify borrower's income for all loans issued.
  • The percentage of loans issued with verified income has gone up recently. Whether the retail lenders are seeing the loans with verified income at the time of offering is an open question.
In 2007, borrowers' income was not verified at all. Since then, the percentage of loans with verified income has been rising. In 2013 year to date, more loans were issued that borrower's income was verified than the loans with unverified income.

Initial List Status of Loan

Lending Club reserves a few loans for 12 hours and offers them to the institutional and large retail lenders who want to lend the whole amount for a loan. I am not sure whether the historical loan data file includes the loans that were offered and picked up by lenders as 'whole' loans. But, the loans that were initially offered as whole, designated with 'w', but not picked up as 'whole' loans are listed in historical loan data file.

The chart below shows the percentage of loans with verified and unverified income of borrowers with initial listing status and issued year of the loans. Lending Club started offering the 'whole' loans only since late 2012. With the limited data, there doesn't appear to be any significant difference in percentage of loans with verified income between the loans that were initially offered as whole or fractional.

Key Takeaways

  • Lending Club is verifying borrower's income for greater percentage of loans issued on its platform recently.
  • There is no significant difference in income verification for loans initially listed as fractional or whole.


  1. Hi Anil,

    Have you done any regressions etc using the data available on their web page to duplicate their model of bucketing borrowers into groups A1-D5?


  2. Hi Anil,

    Have you done any regression based analysis to replicate their risk model?


  3. Thanks, so does loan verification matter?

  4. Anil,thanks for the great posts. Did you attempt to correct for the length of time since issuing? Feels like by the time you ran your analysis many of the loans were only around 12 months and likely didnt have enough time to default yet, making the % that defaults early appear greater than in reality. Cheers, Miguel