Using Alternative Data to Expand Credit Access

Lack of credit access is a major problem in America.  1 in 5 adults in the US lack the credit history needed to establish a credit score.  These adults are likely to make under $50,000 a year, be young or new to credit, have recently immigrated, or be part of a community historically underserved by financial institutions, such as African Americans.  Without a credit score, personal loans and mortgages are hard to come by.  Premiums on insurance are higher as well.

Were credit reporting agencies to add a few alternative data sources to their credit score calculations, they could cut down on the unscorable population by 90%.  The 3 places reporting agencies should look are bank transactions, rental payments, and telecom/utility bills.  All three cover a wide selection of American adults currently invisible to traditional credit reporting.  Bank transaction data alone could reduce US credit invisibility by 50%.