Consumers without credit scores are essentially ineligible to apply for lending products such as credit cards, mortgages, and auto loans. But recent advances in alternative data and credit scoring methods have made it possible to generate credit scores for millions of otherwise “unscoreable” consumers. Credit scores can give millions of additional consumers access to mainstream lending products, allowing them to forego payday lending or other products that expose them to excessive fees and interest rates, and other undesirable terms.
At a recent panel discussion hosted by the Housing Finance Policy Center, three experts discussed the benefits and challenges of alternative credit scoring. In honor of Financial Capability Month, we share six surprising facts that emerged about alternative credit scores: