If you are like millions of other Americans, you’ve had the unfortunate experience of needing to make a big purchase, like a new phone, a car, or a house, and either being turned down because of poor or lack of credit, or being approved with much higher interest rates.
Our financial system runs on credit, but sadly, one out of every five Americans simply has no substantial credit history to report. These are often individuals who have an excellent history of financial responsibility, such as paying bills on time, but traditional credit reports simply don’t count things like utility bills and phone bills.
Considering the issue of a lack of credit history is so pervasive, it’s clear we need to update the credit reporting process. By including alternative data such as rental payments, utility payments, and phone payments, 90% of those individuals who are currently considered “unscorable” would finally be able to receive an accurate credit score. Not only that, but almost half of these individuals would actually fall into the prime or near primer borrower category.
The inclusion of alternative data would mean that more young people, Hispanics and African Americans, recent immigrants, recent divorcees, and those who use mostly cash or debit cards, could finally begin building credit history to create a more balanced financial state for themselves and future generations.
