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There have been countless occasions that you are out shopping and as you are checking out, the cashier will ask the above question. You are in the middle of that shopping euphoric state of mind. We know it happens especially when you have paid all of your bills, and you are paying yourself. It is a standard practice in retail to ask the question when you buy anything that totals up to around $100 or more (stores have different price points). In fact if you have worked retail or are currently working retail, you already know that you must ask it.

We thought you would be interested to know that store credit cards (aka private label credit cards) are a $100 billion industry which includes retail cards, third party cards, travel cards, gas cards, and a few others. Interestingly, very few of the retailers run their own programs anymore. Most are run by third party banks and processors and interest rates are typically much higher than credit cards (averaging in the 20-25% range).

Hey, we like a good deal as well as anyone else, but one of the reasons we started Lending Club was to make it easy to repay your debt. That is why we automatically debit each monthly payment from your bank account. The challenge with retail cards is that it is another bill that you have to remember to pay. You might not even recognize the envelope when it is received so it might go into junk mail.

Lending Club believes that if you went in there shopping to reward yourself with something new, and you have the money, you should spend that money on your purchases. The mind will play tricks on you when you are on that shopping “high”, so just remember – 22.9% to 24.9% interest – that should alleviate any urge to save “10%”.

It has been less than a month since we launched Lending Club exclusively on Facebook, and it feels like a decade! As TechCrunch reported last night, it took us two weeks to pass our first significant milestone of $100,000 in loan origination (since we closed our first loan on June 6). We’d like to take this opportunity to share other numbers:

Lending Club is now the #1 most popular “Money” application on Facebook (by number of installs). As much as we like numbers, there is one thing that we like even more: these 3 stories right here are exactly the reason why we founded Lending Club:

When I discovered LendingClub.com, I felt so lucky. I was just about to graduate from college, and the money I'd been able to save from my part-time job wasn't enough to pay for the deposit on a new apartment. I was this close to being homeless! But in a few days, LendingClub.com found some people willing to lend me the money and got me a great rate, too. Thanks, LendingClub.com!

-Diane from New Jersey

While we have many reasons to rejoice about how things are going on Facebook (watch out for our next announcement tomorrow), we wanted to share with the community an issue we are now facing as we start looking into the numbers.

We have processed over 238 loan applications in the last 3 weeks, out of which we have listed 79 approved loan applications, or roughly a third of all loan requests. Should we be concerned about this low approval rate?

Our goal is to make person-to-person lending mainstream. So mainstream that ten years from now, carrying a credit card balance or taking a personal loan from a bank will seem like an odd thing to do.

We believe person-to-person lending can realize its mainstream potential only if it is easy, safe and private. In an effort to make p2p lending safe, our credit policy sets high standards for approval of a loan listing: FICO score above 640, and debt-to-income ratio under 21% (not including mortgage). This policy has caused the exclusion of 2/3 of the loan requests received on Facebook so far.

We believe in free market and free determination, but we also believe that interest rates and credit risks are complex in nature, and not entirely governed by market forces: for example, as credit risk increases, interest rates cannot always keep up with that risk, due to state limitations, usury rates and other regulatory constraints.

So we believe we’re doing the right thing in setting up stringent credit criteria in an effort to protect our community of lenders and borrowers. Nonetheless, we founded Lending Club on the premise that we will help as many people as possible. In that perspective, a 33% approval rate is not fully satisfactory. We strongly believe the Facebook community is an ideal environment for person-to-person lending and tomorrow’s announcement will further establish this belief. We found it important and useful nonetheless to share the issues as much as the good news.

We do not have a solution yet, but wanted to share the problem. As usual, we’d love to hear back from you.

Renaud from Lending Club

If you are interested in a more complete understanding of what factors into your FICO score, you might want to look at this page that explains it all. We will go over them.

Payment History – 35% of your score depends on this. This means, have you paid on time consistently. It is very important to have a solid track record of on-time payments. Late payments and bankruptcies will hurt your score.

Amounts owed – 30% of your score depends on how much you owe. The more you owe, in relation to your credit limit, the lower your score will be.

Length of credit history – 15% of your score depends on this. Note that even if you don’t have a long credit history, if you are responsible with your credit you can have a decent score.

New credit – This makes up 10% of your score, but if you don’t need the additional credit, it is probably a wise choice to save your money and your credit score.

Types of credit used – Again, this only makes up 10% of your score, but it is a component of the overall FICO score. It is good to balance the types of credit that you have between credit cards, installment loans, auto loans, and others.

One thing that you didn’t see above is anything about race, color, religion, national origin, sex, and marital status, and whether you receive public assistance or exercise any right under the federal Equal Credit Opportunity Act or the Fair Credit Reporting Act. Interestingly, income is not factored into your FICO either.

Note that Lending Club has a minimum FICO requirement of 640. The average FICO score in America is 723 and about 75% of Americans will meet our minimum.

Several of you are wondering, besides the “how it works” page that you can read on this site, “How does it really work?” We continue getting more attention from an increasing variety of places: read this article that came up yesterday - if you can. We are also getting more questions about our matching technology LendingMatch™.

We believe Lending Club very much resembles a marketplace. The closest analogy would probably be a “stock exchange”, except that members trade loans rather than stocks. As in a stock exchange, we believe that technology is critical in making the exchange run more efficiently and help match supply and demand.

The main difference we see, however, is that person-to-person lending is not only about numbers, about supply and demand. It is about people helping other people achieve their financial objectives. On both sides (lenders and borrowers), real people benefit from the exchange by obtaining better rates than they would from a bank.

Recognizing this specificity, we have built a technology called LendingMatch™ that not only matches supply with demand but also takes into account personal attributes such as the connections that exist among all of us. As a lender requests a loan portfolio recommendation, LendingMatch™ generates a portfolio of 20-30 portions of loans that matches the lender’s risk tolerance and desired return (based on a borrower’s credit score, debt-to-income ratio, etc.). The algorithm also favors borrowers who are connected to that lender through Facebook groups and networks. Lenders can decide to invest in their own geographical network, school network or other community they feel connected to.

Very soon we will be having some more technical postings here. Watch out for a few posts from our CTO Joaquin Delgado coming up in the next couple of weeks.