More than 30 years after FICO scoring was created, Kate Hao,CEO of Happy Mango, said it's broken, leaving millionsout of the mainstream financial system despitetheir creditworthiness.

“For decades, credit has been based on credit history, but howdo you lend to those without credit history?” said Hao, a formertreasurer with Morgan Stanley who created Happy Mango as analternative credit assessment tool and an industry partner forimproving financial health. “I believe credit markets can bemade to work better for borrowers and lenders and social creditscoring is an answer.”

Happy Mango is an online tool that creates an alternative creditscore by analyzing spending and saving habits continuouslyonline.

Happy Mango's main product is credit assessment based on anindividual's cash flows and verified social references. Theassessment is delivered to the lenders through a web-based toolthat automates many manual processes in underwriting. Lenders usingthis product not only get a fresh and accurate credit assessment,but also a paperless underwriting platform.

After launching its beta in February 2015, Happy Mango iscurrently helping the $9 million Neighborhood Trust Federal CreditUnion and a community bank, both based in New York City, to improvethe efficiency and accuracy of their underwriting. Financialinstitutions will direct loan applicants to start a Happy Mangoprofile and Happy Mango will provide credit reports for free.Eventually the goal is to have financial institutions pay to pullHappy Mango-generated credit reports in order to make lendingdecisions.

“Every month I can get a report on how many [borrowers] havedefaulted, but it doesn't tell me anything about whether theborrowers do have cash flow, whether they have a job, whatindustries they work in,” Hao said. “That level of information didnot exist.”

Other personal finance tools aggregate banking and credit cardinformation to help consumers understand where their money goes.Happy Mango applies that aggregation technology to pull infinancial information with the user's consent and helps lendersmake credit assessments based on information not found in a creditreport.

Other platforms tend to focus on day-to-day transactions, whileHao said Happy Mango, which is a free service, focuses on thebigger financial picture. Consumers who carefully manage their cashflow but don't have an established credit history are most likelyto benefit from Happy Mango.

“If you're really not good at managing your finances, ourassessment is going to show that,” she said.

Happy Mango allows users to submit testimonials about theircharacter. Positive feedback provides 10% of a score, which is on ascale of 0 to 100. They also assess credit risk based on gainingaccess to a user's bank accounts, with permission, and viewing theaccounts' saving and spending, and income and spending habits.

Hao hopes this type of credit assessment will appeal tomillennials and the underbanked and even divorced people whosecredit has been destroyed by an ex-spouse.

“Traditional credit stores are a proxy for trustworthiness and aweak linkage,” Hao said. “Instead, culling savings and spendingdate and letting your friends weigh in on your reliability makesthe process more personal. This is a movement to humanize creditscores.”