KakaoBank cuts rates for loans to the less creditworthy

KakaoBank on Wednesday cut rates by up to 1.2 percentage points on loans targeting people with poor credit.

The internet-only bank announced earlier in the year that it will expand loans to people with poor credit or "thin filers," those with not enough credit data to complete a full analysis, within the year.

In March, the bank also raised the upper limit on loans targeting low-credit customers from 50 million won ($44,400) to 70 million won.

The bank faced criticisms that it is mostly targeting customers with good credit, which goes against its original pledge that it will strive to serve those with relatively weak credit but still the capacity to repay loans.

The bank has been developing a new, more complex, credit scoring system that takes into account both financial and non-financial data to identify those more likely to pay back loans considering their usual spending habits even if their credit is poor for some personal reasons.

By the latter half of the year, the bank said it will come up with fresh financial products targeting poor credit customers using its own credit scoring system.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]