Hybrid Bank: Credit Utilization Ratio and its Impact on Credit Score

3 min readNov 13, 2020


Dwelling in-depth about discussions on credit, debit, lending, and credit scores brings to the surface the usage of various terms related to the finance industry. Equity, creditworthiness, loan-to-value ratio, debt-to-income ratio, and credit utilization ratio are some of the industry’s most commonly used terms, by lenders and borrowers alike.

In this respect, to equip users in making informed decisions, this article is an attempt to cover one of the most important features of credit and debit — Credit Utilization Ratio. Credit utilization ratio is responsible for 30% of the weightage on credit scores. In other words, credit utilization ratio is the second most important feature on your credit report, after payment history (35%), that goes on to affect your credit scores.

The Making of Credit Utilization Ratio

Lenders are constantly on the lookout for overextended credit usage rates, primarily to avoid defaulting on loans. That brings up the question of what makes credit utilization ratios possible and how it is assessed to give lenders information about risk and default.

In traditional lending and borrowing, lenders assess the capacity of a borrower to repay loans by taking into account information like employment and income. This assessment, otherwise known as the debt-to-income ratio (DTI), determines the capacity of a borrower by contrasting the borrower’s monthly income against their installment debt per month.

While this is one of the foremost and simplest ways of determining capacity, with the increase in instances of banks and lenders giving out subprime and non-prime loans ubiquitously, credit utilization ratio turned out to be one of the most important factors when it came to adjustable rate mortgages (ARMs).

Credit Utilization Ratio for DeFi

With the inception of crypto-based lending in the DeFi space, the lack of a credit rating and information system was widely felt. At the same time, the fact that the blockchain industry upheld its traditions of being a decentralized, encrypted, and trustless system also stood against features like the DTI ratio. Users of cryptocurrency did not have to provide credentials and employment details, and consentless sharing of these details proved to be against the very decrees of the blockchain environment.

Hybrid Bank — a crypto lending platform — is the first in the DeFi platform attempting to resolve this dilemma. To address the risks of default, it offers competitive interest rates and collaterals. Moreover, the lines of credit are adjustable according to the conditions put forward by the lender, depending upon the borrower’s credit score.

Within Hybrid Bank’s credit rating ecosystem, users are fully autonomous as they have control over the creation and sharing of their personal as well as financial credentials. Further, DTI ratio is replaced by Credit Utilization Ratio which measures total debt balances owed by the account compared to the total credit limit. Excellent credit utilization ratios are those below 10%.

As a decentralised credit scoring technology, Hybrid Bank’s solutions generates credit information through real-time assessment of assets held by individual wallets, as well as by blockchain companies and exchanges. Consequently, the system is aware of the value of digital assets, purchase and sale orders, promotional activities, and the community activation indexes of blockchain companies. Thus, apart from simply providing a regular credit score, Hybrid Bank assists individuals and corporate companies with qualitative assessment of crypto-related financial decisions by providing insights into revenue-generation.

In conclusion, Hybrid Bank incorporates credit utilization ratios with other wider quantitative manifestations of the crypto industry so that users can make informed qualitative financial decisions that will ensure passive revenue-generation and remove risks of defaulting.

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Hybrid Bank is building a platform with Tools and Techniques to value Credit Worthiness of Companies dealing in Digital Assets.