> For the complete documentation index, see [llms.txt](https://hypotheca.gitbook.io/hypotheca-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://hypotheca.gitbook.io/hypotheca-docs/hypotheca/how-it-works/credit-scoring.md). # Credit Scoring How Hypotheca combines reputation, security, payment behavior, repayment history, and account age into a 0-1000 internal credit score. Reputation is evidence. Credit scoring is how Hypotheca combines that evidence with behavior and risk signals. Identity establishes who an agent is. Verification establishes whether its current evidence is acceptable. Credit scoring measures the broader history behind that evidence. Hypotheca maintains an internal credit score that is separate from external reputation. No single metric determines the result. The final score is normalized to a range of **0–1000**. ### Five signals, one score The internal score combines five weighted signals: ``` 30% Reputation 25% Security 25% Payment History 15% Repayment History 5% Account Age ``` This model avoids treating reputation as the only measure of creditworthiness. ERC-8004 reputation is the largest single input, but it is still only one input. ### The formula ``` Hypotheca Credit Score = (Reputation Score × 0.30) + (Security Audit Score × 0.25) + (Payment History Weight × 0.25) + (Credit Repayment History × 0.15) + (Account Age × 0.05) ``` Each component is normalized to a 0–1000 range before weighting. The weights determine each component's contribution. The result is a single internal score from 0 to 1000. The formula combines the stated inputs only. It does not define a separate dynamic recalculation method for individual events. ### What each signal captures #### Reputation **Weight: 30%**\ **Source: ERC-8004**\ **Range: 0–1000** Reputation represents the external reputation signal available through ERC-8004 infrastructure. It has the largest weight because it contributes persistent context about the agent. External reputation is not the Hypotheca Credit Score. It is one input into that internal score. #### Security Security contributes **25%**. Its assessment is based on audit depth and security assessment, with an original range of 0–100. The security score is inverted. Lower security risk produces a higher credit-score contribution after normalization. A high contribution does not establish that an agent is secure in absolute terms. #### Payment history **Weight: 25%**\ **Range: 0–100** Payment history measures demonstrated economic activity through: * Receipt count * Payer diversity * Recency This signal captures verified payment behavior. It does not guarantee future repayment. #### Repayment history Credit repayment history contributes **15%** and has a range of 0–100. It evaluates on-time repayment and default behavior. This is the direct behavioral signal within Hypotheca's own credit history. It reflects recorded credit outcomes without serving as a guarantee of future behavior. #### Account age Account age contributes **5%** and has a range of 0–100. It is based on time since ERC-8004 registration. Its smaller weight is intentional. Account age provides context, but it does not outweigh reputation, security, payment, or repayment evidence. ### From score to access The score maps into credit tiers. Each tier defines measured access parameters, including a multiplier, maximum effective LTV, and an interest-rate adjustment relative to the base rate. | Tier | Score | Multiplier | Maximum Effective LTV | Interest Rate Adjustment | | -------- | -------- | ---------- | --------------------- | ------------------------ | | Platinum | 800–1000 | 1.10x | 82.5% | Base -20% | | Gold | 600–799 | 1.00x | 75% | Base -10% | | Silver | 400–599 | 0.85x | 63.75% | Base | | Bronze | 200–399 | 0.60x | 45% | Base +15% | | Rejected | 0–199 | 0x | 0% | N/A | The effective LTV must never exceed **90%**. The score affects measured access, but does not remove the protocol's broader risk controls. ### What the tiers mean Higher tiers can provide greater borrowing capacity and more favorable rate treatment. The multiplier is part of the tier's measured access parameters. It is not a guaranteed borrow amount. **Platinum** applies a 1.10x multiplier, an 82.5% maximum effective LTV, and a base interest rate adjustment of -20%. **Gold** applies a 1.00x multiplier, a 75% maximum effective LTV, and a base interest rate adjustment of -10%. **Silver** applies a 0.85x multiplier, a 63.75% maximum effective LTV, and the base interest rate. **Bronze** applies a 0.60x multiplier, a 45% maximum effective LTV, and a base interest rate adjustment of +15%. Scores below 200 are rejected. They have a 0x multiplier, 0% LTV, and no applicable interest rate. ### Why the score is not the gate **Credit Score ≠ Credit Gate** The score is one component of the broader credit system. It does not bypass the mandatory conditions that govern a borrow request. A high score does not override: * Failed identity verification * An invalid security report * Insufficient payment receipts * A restricted asset * A paused oracle * Excessive LTV {% hint style="info" %} Score influences access. It does not bypass verification. {% endhint %} The Credit Gate still requires every required condition to pass. The score supports measured access within that decision framework. ### Score, history, and reputation The relationship between external reputation, the internal score, and recorded activity is conceptual: ``` ERC-8004 Reputation ↓ One input into Hypotheca Credit Score ↓ Credit Tier ↓ Measured access parameters ↓ Borrow / Repay / Liquidation history ↓ Future credit assessment ``` Borrowing, repayment, liquidation, and reputation updates are recorded through transaction events. These records create persistent credit history that informs future assessment. The stated model does not define a separate formula for how each future event changes every component. It defines the five weighted inputs and the tiered access parameters. ### A measured model, not a guarantee The score translates multiple forms of evidence into measured access. It does not eliminate lending risk or guarantee repayment. It does not replace security checks, oracle controls, LTV limits, or liquidation mechanisms. It operates as one layer inside the broader risk-managed credit system. With the credit model established, the next section examines the technical infrastructure that enforces it. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. 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