- Posted by Laurie Anderson
- On June 12, 2017
- alternative credit data, CFPB, credit, credit invisible, FactorTrust, underbanked
Underbanked Consumers Can Become Visible with Positive Payment Behavior
ATLANTA—FactorTrust, The Alternative Credit Bureau, supports the Consumer Financial Protection Bureau (CFPB) for recently examining findings that bring to light the plight of credit invisibles in their transition to establish credit.
FactorTrust has long-provided alternative credit data, analytics and risk scoring information that lenders need to make informed decisions about underbanked consumers (less than 700 credit scores) and credit invisibles, which the CFPB identifies as about 11 percent of U.S. adults (or 26 million people)—with no credit history at the Big 3 credit bureaus.
The CFPB study[i] issued on June 7, 2017 indicates that while consumers’ economic situations contribute to establishing credit history, consumers often become visible through credit-negative events, such as debt collections and defaults.
FactorTrust, in its recent Comment to the CFPB’s request for information (RFI) on the use of alternative data and modeling techniques in the credit process, contends, however, that consumers can become equally visible with positive payment behaviors not reported to the Big 3 bureaus.
FactorTrust found, for instance, that 57 percent of underbanked consumers had a comprehensive debt to income (DTI) ratio of less than 50 percent. For these consumers, less than half of their income was earmarked for loan payments. Lower DTI typically indicates a lower-risk consumer who is better positioned to responsibly take on new financial obligations.
Furthermore, FactorTrust noted that consumers with lower DTI, had a higher share of debt payments residing outside of the Big 3 bureaus, in alternative credit bureaus like FactorTrust.
“The data we collect from alternative lenders is not reported to the Big 3 bureaus and enables visibility into the creditworthiness of underbanked consumers,” said FactorTrust CEO Greg Rable. “Not only can we look to data points in our database to outline positive payment scenarios, but we can collect it in real-time, versus the monthly timeframe of the Big 3 bureaus. Alternative lending tends to have shorter loan terms than traditional lending options, which makes reporting of on-time payments and other data accessible around the clock to lenders, enabling them to make smarter, faster decisions about the creditworthiness of credit invisibles.”
FactorTrust is differentiated from the Big 3 bureaus by its more than 250 million unique, behavioral and transactional data points untapped by these traditional sources.
Read FactorTrust’s full Comment to the CFPB’s RFI on the use of alternative data and modeling techniques in the credit process.
For more information on FactorTrust, visit www.factortrust.com or contact 866.910.8497.
FactorTrust, The Alternative Credit Bureau, is relentlessly dedicated to proven analytics and clean credit information that provide lenders and financial service providers opportunities to grow more revenue, meet compliance regulations and serve more consumers with more credit options. At the core of FactorTrust is alternative credit data analytics and risk scoring solutions not available from the Big 3 bureaus. FactorTrust alternative credit data and analytics accurately predicts risk and the ability to repay near and non-prime consumer loans in real-time. The company’s solutions enable financial service companies an opportunity to uncover creditworthy prospects that are not surfacing via traditional credit sources. Headquartered in Atlanta, the experienced FactorTrust team has delivered unique data and valuable insight to U.S. lenders for more than 10 years. For more information on the quarterly FactorTrust Underbanked Index or the company itself, visit www.factortrust.com.
# # #