What is Low and Grow?
Risk
Low and Grow is a lending strategy that approves a small initial amount for customers with no credit history, observes their payment behavior and raises the amount gradually if they comply. It allows inclusion without exposing the portfolio up front.
Why it matters
With no history, declining is the comfortable way out and also the most expensive: you lose a customer who could be good. Low and Grow replaces the initial value judgment with real payment evidence.
Its golden rule is that risk is sensitive to the amount: the winner is whoever offers the highest amount the customer can handle without exceeding their capacity to pay.
- Inclusion of thin-file customers with contained exposure.
- Payment behavior creates the reference that did not exist.
- Requires calibrating the speed, term and price of each increase.
Common questions
How often can the amount be raised?+
It depends on behavior and the customer's capacity to pay. The practical rule is to avoid payment shock: if the installment jumps too much from one period to the next, the customer stops paying.
Related terms
Affordability
Affordability is how much a person can put toward loan installments without compromising essential expenses. It is estimated from their income and existing obligations, and it defines the maximum reasonable amount to grant.
Alternative data
Alternative data are non-traditional information sources —transactional behavior, open banking, device data, telco or utilities— that complement the credit bureau to assess applicants with little or no history. They make it possible to lend to populations traditional scoring can't reach.
Champion/Challenger testing
Champion/Challenger is a technique for improving credit policies by routing a share of traffic to an alternative policy (the challenger) and comparing its performance against the one in production (the champion). It lets teams validate changes on real data at controlled risk before adopting them.
Back to the full glossary.
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