THE TRUTH ABOUT ALTERNATIVE CREDIT DATA
In the age of technology and smartphones, a new trend is becoming popular with credit bureaus. The term is called “Alternative Credit Data” used to determine creditworthiness. According to Rent Track, 60 million adults in the U.S. function on a daily basis with little to no credit. In these cases, the people may be unable to qualify for loans, open credit cards, or other accounts like mobile phones, or in some cases get a job or rent an apartment.
The issue is disheartening for someone trying to succeed, so the government and credit bureaus have chosen to use alternate methods of verifying creditworthiness. Along with the ability to examine online Internet usage credit history, it can also be used to minimize fraud situations. By using Alternative Credit Data it allows for a more organic approach to determining credit lending. According to Catch-22- of Credit states, “you need credit to generate a credit score, but you can't get credit without a credit score, it’s an unfair cycle that must be broken.” Hence, the reason for alternative data.
It is a common problem for people with lower incomes, certain ethnic groups, and some young individuals to gain credit. Typically, FICO has always used other information to determine your credit report, but it’s becoming a new trend to use online data as well. The plan is to depict your financial behavior through daily habits. Consumers online digital footprints can be a clear indicator of creditworthiness.
The world of finance has progressed immensely; gone are the days of walking into a bank to get a loan. Since alternative options are becoming popular, consumers go online and research digital loans. They can find the best rates, fill out the application and get approved without ever leaving the home. Alternative Credit Data give you this outlet. However, it’s important to debunk the myths associated with this financial decision.
Myth One: Alternative Credit Data is irrelevant.
Myth Two: Borrows with little or no credit is high risk.
Myth Three: Alternative Credit is not accurate or does not have merit.
Myth Four: Alternative Credit is damaging to the consumer.
Anytime a lender loans money there is always a risk of non-payment. It’s an inevitable outcome that creditors accept. But to say that a low-income person, recent immigrant, or young consumer will be a credit risk it faulty thinking. Experian states, “One in five U.S. consumers has an alternative financial services data hit– some of these are even in the exceptional or very good credit segments.” In, fact the alternative finance data has proven to be 99.9% accurate.
Other sources of concern implicate alternative credit data to be harmful to the borrower, but studies have shown when information is assessed correctly lenders believe the credit data will help consumers who are less likely to be approved under traditional lending application methods.
Experian has joined the trend by adapting a new style of lending aspects called, “Credit 3D.” By using a credit profile combined with a trended credit data it displays a true customer lifecycle. It allows creditors to predict new markets and opportunities for assisting potential clients. In addition, Experian has developed credit profiles to manage policies that attract consumers and retain customers. The Trended Solutions include:
Experian TAPSSM - Total annual credit card and charge card spend
Trend ViewSM - Find customer credit trends
Quest Line Management AttributesSM - Monitor customer credit line levels
Another exciting outlet for populations that have struggled with obtaining credit, Experian also created a credit profile for their demographics.
Extended ViewSM Score - Assess the creditworthiness of underserved consumers
Pre-qualification - Prequalify consumers for credit in real time at the point of contact
Income InsightSM Models - Determine a customer’s ability to meet their financial obligations
Premier AttributesSM - Make strategic decisions across the Customer Life Cycle
Experian Credit EducatorSM - Provide your customers with personalized education sessions
In society, having just an average credit rating may not be enough. Think of your credit score as a resume, your life history. It paints a clear example of what type of person you are in real life,
“I have over seventeen years’ experience in real estate entrepreneurism and life coaching. One of the first topics discussed is a client’s credit rating because it will determine the next course of action,” Chayo Briggs
Something simple like getting a place to live requires a credit history report,“Therefore, I am committed to assisting people in understanding the importance of credit credibility,”
In conclusion, while traditional credit lending methods are still the norm, alternative credit data is becoming a growing preference to enable credit-challenged individuals the ability to advance in life and fulfill their financial dreams. If you would like to discuss building your credit resume please contact me at any of the following:
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