Credit is one of the most useful financial tools in the game. But not everyone has reliable access to it. In the United States today, 92 million adults have little to no credit history. 25 million of them are considered credit invisible, meaning scoring agencies lack sufficient information on these people with which to establish a credit report. People with little to no credit history often belong to the groups historically underserved by financial institutions. They are more likely to be Hispanic or African American, make under $50,000 a year, and/or be recently widowed or divorced. People with limited credit history pay higher interest rates on loans and increased premiums on insurance.
How can lenders remain responsible while expanding credit access? They should leverage alternative data. Adding 3 new factors to credit score calculations could move 20 million more consumers into scorable credit bands. With consumer permission, bank transaction data, rental payment records, and telecom/utility bills can tell a coherent story about an individual’s financial history. Considering bank transaction data on all consumers could reduce the credit unscorable population by 50%. 9 in 10 Americans have at least one utility bill, allowing a wide range of insight.
Learn more about the role of alternative data in the infographic below: