Alternative Data Could Turn Millions of Americans into Prime Borrowers

Having a great credit score can be one of the most important things adults can acquire when it comes to their financial security. It makes the purchase of any of the biggest items, such as a house, car, or new cell phone, easier in general, but also easier on the budget overall, since the best credit scores get the best interest rates, and vice versa. 

Unfortunately, for millions of Americans building credit seems like an unattainable goal as they simply lack the opportunity. They are unable to get a credit card, since they have no credit, and their monthly bills are often things that are never counted on a traditional credit report. These individuals are likely to be young, Hispanic or African American, recently immigrated, recently divorced or widowed, or those who mainly use debit cards or cash. They’re caught in a catch 22 where they cannot build credit because they don’t already have credit. 

It turns out that 7.5 million American consumers would be able to move into the scorable category or from subprime to prime borrower categories if credit reports began to include alternative data. Many of these individuals are financially responsible and could be more accurately scored accordingly if credit reports included things such as phone bills, utility bills, and rental payments. 

The current, yet antiquated system for credit scoring is leaving millions of responsible Americans behind.