Creating More Financial Opportunities with Alternative Data

Alternative data is providing better insights into what is going on with people’s credit file outside of the information provided in traditional credit, helping businesses make better decisions. Speciality finance data is alternative data that includes short term installment loans, rent-to-own information, and other non-traditional lending elements. Telco and utility data includes home security and utility payment history as well as telecommunications. 

Currently more than 75 million Americans are not able to easily access credit because they are credit invisible as they do not have a traditional credit file or have thin files or less than four credit accounts on their credit file. About 76 million Americans have little-to-no credit history with about 61 million having thin files and about 16 million being considered credit invisible. Typically these people are new to using credit, do not use credit regularly or at all, are divorced, or are debit card users. 

Being credit invisible can result in costly payments in the long run, especially when it comes to mortgages or interests. But with alternative data, a significant 13.6 million consumers could qualify for better credit scores and more financial opportunities. Using utility and telco data could help more than 6 million people to become scorable while layering specialty finance data can help an additional 2 million people. In fact, 66% of people have seen a 10-point positive change to their credit score while 10% have seen a 25-point positive change to their credit score with telco data. 

While traditional credit reports are still the best indicator of credit history and past financial reliability, alternative data can help increase access to credit and support a wider portion of society.