- Posted by Laurie Anderson
- On August 21, 2017
- alternative credit data, Big 3 bureaus, credit profiles, credit scores, FactorTrust
by FactorTrust CEO Greg Rable
If a doctor determines the root of an illness without considering a patient’s entire health history, it’s not just irresponsible – it could result in an incomplete and inaccurate diagnosis.
The same is true of consumer credit data. When lenders do not receive all of a consumer’s credit history, they cannot properly provide consumers with the best lending options.
This is the scenario in place in the alternative financial services market today. Lenders are being kept in the dark about the full creditworthiness of consumers. Decisions should be made based on the entire picture of consumers’ financial activities, not just a snippet of that information.
But alternative credit data does exist for consumers with less than 700 credit scores—an estimated 113 million consumers. It’s just that the Big 3 bureaus never consider it.
This antiquated way of doing business means Big 3 bureau data has been called “old” and “stagnant.” Alternative credit data, instead, is paving the way as the next generation of data.
Many consumers, namely the underbanked, find themselves shut off from financial providers because their alternative loans are not reported to the Big 3.
Historical traditional data used by the Big 3 to indicate performance is no longer the norm. Today’s data is available in real-time and more predictive.
Consider data from FactorTrust, the alternative credit bureau. It is available in real-time, as alternative lending tends to have shorter and more frequent terms. Thus, data is available around the clock to lenders.
Many of today’s lending sources are online and must be nimble and more responsive to customers. Lending decision makers can’t wait on old data to make decisions about consumers. They need current, more predictive alternative credit data, and they need it now.
But that’s not the only limitation of traditional bureau data. Today’s news offers more questions than answers on the accuracy of data coming from the Big 3. Traditional data is leading to unsound loans, and regulators are taking note. Fines for improper and inaccurate usage of data around consumer credit scores are at an all-time high.
Still, even if the credit reports are correct, they are not necessarily complete. They lack information. They don’t include real-time data on behavioral metrics that indicate consumers’ stability. Alternative credit data pinpoints the number of times consumers move homes, the number of cell phone numbers they use, and the distinct number of banking accounts with which they do business, to name a few. This is meaningful data that, when combined with public and private records, sanctions and identity-related information, provides a better snapshot of consumer performances, revealing a person’s ability to pay back a loan.
To properly move into the next generation of alternative credit data, this “alternative” information needs to be available through the Big 3 bureaus. We must insist that providers make alternative credit data available to lenders via the bureaus. It’s a simple solution and the obvious next step in today’s evolving financial environment.
Continue the conversation by connecting with me at email@example.com to discuss how to request alternative credit data through traditional sources. Learn more on our blog at www.factortrust.com and download a white paper that helps identify new opportunities using alternative credit data.
Greg Rable is FactorTrust’s CEO. He brings more than 20 years of strategic development, management and technology experience to FactorTrust, along with extensive experience in electronic payment, online commerce and communications. Since founding FactorTrust, Rable has overseen rapid growth in the US and expansion of FactorTrust’s services to both the UK and Canada. His vision for FactorTrust is to build the leading specialized credit reporting agency and analytics business for the underbanked.