Alternative Credit Data: Is Your Financial Institution Getting The Full Story?

Alternative credit data is consumer facts relating to financial the past that does not return from one regarding the 3 general credit bureaus. This data includes an alternate variations of sources ranging from telecommunications and utility bills to payday lenders and confirm cashers. Alternative credit data is another method for financial institutions to be can calculate the credit risk and worthiness associated with consumers. It is many times a less-expensive method to prescreen or pre-approve applicants without possessing to pull records from the general credit bureaus. This alternative data is beneficial to most consumers and financial institutions.

As already stated, financial institutions can pull customer data from these decreased priced sources first and calculate worthiness. If the consumer is not worthy, they should be taken out regarding the pool prior to applicant's credit file is pulled from a more expensive bureau. In addition to a decreased cost, financial institutions can combine facts from most the general bureaus and the alternative data sources to obtain a more comprehensive view regarding the consumer. This has proven to be effective within the past little years as consumer behavior has grow to fewer predictable due to the economic downturn and general data is sometimes insufficient at painting an accurate picture regarding the current situation. With the combination of most sources, financial institutions can better predict the future credit behavior of lone consumers.

These alternative sources have also grow to more important to consumers as changes take location within the financial industry; with policy changes, economic turmoil, and other adverse conditions, some consumers are seeing their credit worthiness decrease when only the general histories are evaluated. For consumers without a tough general credit history, alternative data can demonstrate their credit worthiness in ways other than the data provided by the 3 general bureaus. With their the past of paying off bills on time, paying return payday loans, and other non-traditional, but financially responsible actions, they can be can display the lenders that they can be a little risk to the institution. The benefits of creating use of alternative data to make decisions are many to most the consumer and the financial institutions. For the lending institutions, alternative data can make decisioning more accurate, comprehensive, and affordable.

Alternative credit data should be used to compensate for bureau thin files and no-hits, screen out obvious credit risks more affordably, and supplement general credit data to make it more predictive.