There are millions of Americans who are struggling to become credit visible, but alternative data can help these individuals. Alternative data is Fair Credit Reporting Act compliant information that can score up to 32% of consumers who were previously considered unscorable. This kind of data includes speciality finance data like short term installment loans and other different lending options as well as telco and utility data like telecommunications and utility payment history.
Unfortunately, more than 70 million Americans cannot access credit because they do not have a credit file (credit invisible) or have limited credit history (thin file). Almost one third of U.S. adults have thin files or are credit invisible, which means about 76 million Americans have little-to-no credit history. These are usually people who do not use credit regularly, have not used credit for a long time, or are cash users.
A low credit score can ultimately result in more interest that needs to be paid, especially for loans and mortgages. More than 50% of Americans are unable to pay an unexpected expense without outside help while one in three Americans have more credit card debt than emergency savings. That’s where alternative data comes in.
Utilizing alternative data can help shift more than 8 million U.S. consumers into scorable credit bands and gain access to prime offers. Incremental populations become scorable with the use of alternative data like telco and utility data and the incorporation of AI, helping many individuals experience positive credit score changes and becoming scorable. Alternative data can help support a more inclusive economy in the long run.
