Getting Credit Through Alternative Data

Alternative data can be quite helpful to businesses, especially because this type of data shows what may be going on outside the usual consumer credit file. Alternative data is information compliant with the Fair Credit Reporting Act and includes specialty finance data and telco and utility data. However, more than 70 million Americans may face challenges accessing credit because they have a thin file or credit invisible. 

A snapshot of consumers shows that nearly one in three adults in the U.S. have thin files or are credit invisible with many relying on higher-cost alternative financial products and services. Those who don’t have a strong credit history are more likely to be young adults, are new to using credit, have immigrated recently, have not used credit for a while, do not use credit accounts, are recently widowed or divorced, or are cash users. For these people, credit invisibility can cost a lot, such as an additional $32,923 in interest on a 30-year mortgage. 

In fact, more than 57% of Americans are unable to pay an unexpected expense from savings, usually borrowing from family or friends or taking out a personal loan. Compared to those who borrow with prime credit scores, those with subprime credit scores tend to pay more in interest when it comes to loans. Alternative data could help 5% more U.S. consumers (13.6 million) to qualify for prime or better financial offers. For example, telco and utilities data can help open more financial opportunities and positive credit score changes, resulting in more than 6 million U.S. consumers to move from unscorable to scorable. 

Alternative data can unlock new economic potential and create more beneficial financial opportunities for many.

Expanding Access to Credit with Alternative Data