> ## Documentation Index
> Fetch the complete documentation index at: https://docs.credprotocol.com/llms.txt
> Use this file to discover all available pages before exploring further.

# How Does It Work?

> Understanding how Cred Protocol calculates on-chain credit scores

## Credit Score Methodology

Cred Protocol analyzes on-chain data to generate credit scores that reflect the financial behavior and trustworthiness of blockchain addresses. Our scoring model evaluates multiple dimensions of wallet activity to produce a comprehensive assessment.

<Info>
  Scores range from 300 to 1000, similar to traditional credit scoring systems. Higher scores indicate stronger on-chain financial behavior.
</Info>

## Credit Factors

Our scoring model considers several key factors when evaluating an address. Each factor contributes to the overall score based on its relevance to creditworthiness.

<CardGroup cols={2}>
  <Card title="Borrowing History" icon="clock-rotate-left">
    Track record of borrowing and repayment across DeFi protocols
  </Card>

  <Card title="Wallet Composition" icon="chart-pie">
    Diversity and distribution of assets held in the wallet
  </Card>

  <Card title="Wallet Health" icon="heart-pulse">
    Current financial standing and risk exposure
  </Card>

  <Card title="Interactions" icon="arrows-rotate">
    Protocol usage patterns and on-chain activity
  </Card>

  <Card title="Trust" icon="shield-check">
    Identity attestations and reputation signals
  </Card>

  <Card title="New Credit" icon="sparkles">
    Recent borrowing activity and credit utilization changes
  </Card>
</CardGroup>

***

## Factor Breakdown

### Borrowing History

Your borrowing history reflects how you've managed debt obligations on-chain. This factor examines your track record with lending protocols to understand your repayment behavior.

<AccordionGroup>
  <Accordion title="What we look at">
    * Loan repayment patterns across DeFi protocols
    * Historical liquidation events
    * Duration and consistency of borrowing activity
    * Repayment timing relative to loan terms
  </Accordion>

  <Accordion title="Why it matters">
    A strong borrowing history demonstrates responsible credit management. Addresses with consistent repayment behavior and no liquidations signal lower risk to potential lenders.
  </Accordion>
</AccordionGroup>

### Wallet Composition

Wallet composition evaluates the structure and diversity of your on-chain portfolio. A well-balanced portfolio suggests financial sophistication and stability.

<AccordionGroup>
  <Accordion title="What we look at">
    * Asset diversity across token types
    * Balance distribution between different protocols
    * Stablecoin holdings relative to volatile assets
    * Long-term holdings versus trading activity
  </Accordion>

  <Accordion title="Why it matters">
    Diversified portfolios indicate thoughtful financial planning. Addresses concentrated in single assets or highly volatile positions may represent higher risk profiles.
  </Accordion>
</AccordionGroup>

### Wallet Health

Wallet health measures your current financial standing and risk exposure across DeFi positions. This provides a real-time view of your creditworthiness.

<AccordionGroup>
  <Accordion title="What we look at">
    * Current collateralization ratios
    * Health factors across lending protocols
    * Distance from liquidation thresholds
    * Overall leverage exposure
  </Accordion>

  <Accordion title="Why it matters">
    Healthy positions with conservative collateralization demonstrate prudent risk management. Addresses operating close to liquidation thresholds present higher risk profiles.
  </Accordion>
</AccordionGroup>

### Interactions

Interactions capture your engagement with the broader blockchain ecosystem. Active participation in reputable protocols contributes positively to your score.

<AccordionGroup>
  <Accordion title="What we look at">
    * Protocol diversity and usage breadth
    * Transaction frequency and patterns
    * Smart contract interaction history
    * Ecosystem participation across chains
  </Accordion>

  <Accordion title="Why it matters">
    Meaningful on-chain activity demonstrates genuine ecosystem participation. Addresses with rich interaction histories across trusted protocols establish stronger credibility.
  </Accordion>
</AccordionGroup>

### Trust

Trust signals come from identity attestations and reputation mechanisms that verify the legitimacy and standing of an address.

<AccordionGroup>
  <Accordion title="What we look at">
    * ENS domain ownership and history
    * Gitcoin Passport score and stamps
    * POAP attendance tokens
    * Other on-chain attestations
  </Accordion>

  <Accordion title="Why it matters">
    Identity attestations provide social proof and verification. Addresses with established on-chain identities and community participation are more trustworthy.
  </Accordion>
</AccordionGroup>

### New Credit

New credit examines recent borrowing activity to identify changes in credit-seeking behavior. Sudden increases in borrowing may indicate changing risk profiles.

<AccordionGroup>
  <Accordion title="What we look at">
    * Recent loan originations
    * Changes in credit utilization
    * New protocol onboarding
    * Velocity of borrowing activity
  </Accordion>

  <Accordion title="Why it matters">
    Stable, gradual credit usage indicates consistent financial behavior. Rapid increases in borrowing activity may signal increased risk.
  </Accordion>
</AccordionGroup>

***

## Feature Selection

Our scoring model uses machine learning to identify the most predictive signals from on-chain data. The feature selection process ensures that scores are:

<Steps>
  <Step title="Data-Driven">
    Features are selected based on their statistical correlation with creditworthy behavior, not arbitrary assumptions.
  </Step>

  <Step title="Resistant to Gaming">
    The model considers complex patterns that are difficult to artificially manipulate, ensuring authentic assessment.
  </Step>

  <Step title="Continuously Refined">
    Feature weights are regularly updated based on new data and observed outcomes to maintain accuracy.
  </Step>
</Steps>

<Warning>
  Attempting to artificially inflate your score through synthetic activity is detectable and may negatively impact your assessment.
</Warning>

***

## Multi-Chain Analysis

Cred Protocol aggregates data across multiple blockchain networks to build a complete picture of on-chain activity.

| Network  | Data Sources                  |
| -------- | ----------------------------- |
| Ethereum | Lending, DEX, NFTs, Identity  |
| Polygon  | Lending, DEX activity         |
| Arbitrum | DeFi positions                |
| Optimism | Protocol interactions         |
| Base     | Ecosystem activity            |
| + More   | Additional L2s and sidechains |

***

## Improving Your Score

While we don't reveal specific weights to prevent gaming, genuine positive financial behavior is always rewarded:

<CardGroup cols={2}>
  <Card title="Maintain Healthy Positions" icon="shield">
    Keep collateralization ratios well above minimum thresholds
  </Card>

  <Card title="Build History" icon="calendar">
    Consistent activity over time establishes stronger track records
  </Card>

  <Card title="Diversify Thoughtfully" icon="layer-group">
    Spread activity across reputable protocols and asset types
  </Card>

  <Card title="Establish Identity" icon="id-card">
    Connect identity attestations like ENS and Gitcoin Passport
  </Card>
</CardGroup>

***

## Next Steps

<CardGroup cols={2}>
  <Card title="Get Your Score" icon="chart-line" href="/api-reference/score/get-score">
    Request a credit score for any Ethereum address
  </Card>

  <Card title="Full Credit Report" icon="file-lines" href="/api-reference/report/get-report">
    Generate a comprehensive credit report with detailed breakdowns
  </Card>
</CardGroup>