News & Resources

Something Other Than Credit Reports

Aug 16, 2010 Brian Bradley

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. They use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. Credit scoring is not limited to banks. Organizations such as mobile phone companies, insurance companies, employers, landlords, and government departments access customer's credit history.

Traditionally, lenders have relied on FICO scores to determine a person's credit background, but some organizations and financial institutions are unseating these scores with alternative credit databases that embrace those who are unbanked, without credit or in credit recovery.

Besides the ordinarily credit report, the financial institutions and credit companies can access alternative databases, relying on residential lease payment trends, utility bill remittances, prepaid card transactions at the point of sale, prepaid phone services spend, relationship longevity and more. Through the use of these records, lenders can see information such as the consumer's property values, educational background, previous bankruptcies or tax liens, phone records, subprime credit information and even professional licenses.

Even reviewing a consumer's eviction record can provide meaningful information about that prospective borrower.  An eviction report is not just for tenant screening.  It also can be a very resourceful way to check a consumer's ability to make timely payments on loans of any variety.  For instance an independent auto dealer knowing someone's eviction history can be a great way to determine the chances of a potential sale becoming a repossession or a good buy here account. Often times pulling an eviction report can be less costly than using a traditional credit report.

Therefore, there are alternative ways financial institutions can make thorough lending decisions, especially if future borrowers have a thin or inaccurate credit file. And save some money in the process!