A New Way to Access Credit Through Alternative Data

Last Updated:
January 31, 2022
Author:
Brian Wallace

The amount of American consumers who are credit invisible or have thin files is astonishing. This credit deficit has sent many scrambling to seek check-cashing services, pawn shop loans, and other expensive alternative financial services, worsening their credit statuses. 

 

Credit invisibility proves to be damaging, with a less-than-ideal credit score adding an average of $32,923 in interest on a 30-year mortgage. Additionally, statistics reveal that 3 in 5 Americans don’t have the savings to cover an unexpected $1,000 expense, with 1 in 3 having to borrow o cover the cost, and 58% of Americans have cited being less than stable financially, leaving 47% to reduce expenditures, 44% to draw money from personal accounts, and the remaining 27% to turn to credit. In all, credit invisibility is extremely costly, resulting in larger interest rates on personal loans and larger premiums on auto, rental, and home insurance, making it a  miser of a predicament to be avoided.

 

A remedy, alternative data, has emerged. Alternative data describes financial history that’s excluded from credit reports, and it can expand Americans’ access to credit.

 

Alternative data takes the form of telco and utility bills, bank transaction data, employment and income verification, and most not talked about, rental payments. Rent payments are another advantageous tool for restoring credit history. Credit checks are frequently conducted by landlords in the leasing process, even though rental data is excluded from credit reports. Statistics show that half of American consumers think that having rental payment information on credit reports and/or integrated into credit scores would be beneficial, and sure enough, rental payment data can help improve credit decisions.

 

Leveraging alternative data could raise 20 million American adults into scorable credit tiers. The value of alternative data is monumental and largely unknown. Recruit it to see how it can add value to your credit and financial stability.


Equifax expands access to credit with alternative data

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