Mar 22, 2021 MicroBilt News
According to Review 42, 44 million Americans are essentially invisible to standard credit scoring systems, as of 2018. While they do not have bad credit per se, they have insufficient credit to go out and get a home or auto loan, may have difficulty renting apartments, and even qualifying for some jobs because they are invisible on every metric the credit bureaus use to judge a person’s creditworthiness. Enter alternative credit scores and the many advantages they offer consumers, including the four listed below.
Consumers Once Considered High-Risk Can be Appropriately Scored
Alternative credit scores use your credit history to evaluate your future creditworthiness. This is based on things like payment histories on loans and credit cards, delinquencies, credit utilization ratios, and other information that requires a credit past to generate.
Alternative credit reporting relies on different types of financial data such as utility payment history, rental payment history, and information from alternative financial service providers, like short-term lenders allowing previously invisible consumers who were considered high-risk to have greater access to opportunities when it comes to borrowing.
Peer-to-Peer Lending Can Assist Businesses with No Credit History
Peer-to-peer lending is a rising star in the world of business lending. It allows businesses that have no credit history to seek funds without going the route of traditional loans. This method has been widely popular among startups by helping them to remain sustainable until they are more established.
Since applicants aren’t required to go through banks and other traditional lenders, the loan process is expedited allowing them to stay afloat while growing their businesses. Many P2P lenders offer greater flexibility than traditional banks which is especially appealing to businesses trying to get established.
The P2P Lending Platform is Experiencing Phenomenal Growth
On February 4, 2021, KSU | The Sentinel Newspaper reports that the P2P lending market is expected to experience robust growth from 2021 through 2027. The global P2P lending market is currently valued at $35 billion and is expected to reach $626 billion by 2027.
What does that mean for the “credit invisible” among us?
The platform exists to serve under-served markets that need short-term financing to help them achieve their goals. Which is ideal for under-served borrowers interested in short-term loans.
Alternative Data Benefits Those Who Do Qualify for Traditional Credit Scores
More information can be useful in helping lenders determine extenuating circumstances and to provide a “bigger picture” idea of a person’s true credit situation. It’s not always about not using a traditional credit score or only meeting the needs of those who do not have them. Alternative Credit Data can also be used to deliver more information to ease the credit decisioning process for lenders.