> For the complete documentation index, see [llms.txt](https://lucia-protocol.gitbook.io/lucia-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://lucia-protocol.gitbook.io/lucia-protocol/credit-reputation.md).

# Credit Reputation

The Lucia Protocol introduces a multi-faceted Credit Reputation System, designed to assess and ascertain a borrower's eligibility for future loans through a dynamically computed credit rating. This credit rating is calculated using a variety of parameters, each contributing to the overall creditworthiness of the borrower. Below is a mathematical representation of some of these factors:

<figure><img src="/files/LkTsg4q8TVJbdWuVCQfa" alt=""><figcaption></figcaption></figure>

**Number of Repaid Loans:** The credit score positively correlates with the number of successfully repaid loans. The parameter emphasizes the importance of a strong, consistent repayment history.

<figure><img src="/files/gaheoWeVKS872qMX0ltn" alt=""><figcaption></figcaption></figure>

**Credit Score of Adjacent Guarantors:** As per the Ethereum Improvement Proposal EIP-6551, the credit rating is also influenced by the credit scores of adjacent guarantors in a tree-like structure, where the borrower serves as the root node.

<figure><img src="/files/PuWY73YdekCqUhkFa8CJ" alt=""><figcaption></figcaption></figure>

**Transaction History:** Upon linking their wallet(s), borrowers share their transaction history. While not a direct measure of creditworthiness, a substantial volume of healthy transactions can enhance the credit score.

<figure><img src="/files/c0lzwiLSa6NoLIKHrdLa" alt=""><figcaption></figcaption></figure>

**Average Timeframe for Past Loan Repayment:** Borrowers agree to repay loans within preset periods (e.g., 1 day, 3 months, 6 months, 9 months, or 12 months) upon initial agreement. This repayment adherence impacts the credit score.

<figure><img src="/files/Tdy69EVaOl8SBdCQt7Oc" alt=""><figcaption></figcaption></figure>

**Number of Past Collateral Liquidations:** Recurrent liquidation events can erode the credit score, signaling potential challenges in loan repayments.

<figure><img src="/files/87buTCc956Da9f4rkAz7" alt=""><figcaption></figcaption></figure>

**Fraud Attempts:** Instances of fraudulent behavior will lead to credit score reduction, and in severe cases, account suspension. Users must substantiate if their accounts were compromised to rectify this impact.

<figure><img src="/files/HYtrEjbuaZzZiItnRYT5" alt=""><figcaption></figcaption></figure>

This Credit Reputation System strives to create a robust, transparent, and accountable framework for borrowers within the Lucia Protocol. By considering a wide spectrum of both positive and negative behaviors, the system ensures a balanced and fair assessment of creditworthiness.


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