Lenders Find Creditworthy Borrowers Hiding in the Data
A credit file doesn’t capture every signal lenders can use to judge whether a borrower will repay. Roughly 25 million U.S. adults lack enough recent credit activity to generate a usable score, the Consumer Financial Protection Bureau (CFPB) noted last year, as PYMNTS reported. PYMNTS Intelligence separately found that 35% of subprime consumers have neither […] The post Lenders Find Creditworthy…
Lenders are discovering new ways to assess creditworthiness by utilizing alternative data sources, such as bank transactions and detailed credit histories. According to PYMNTS Intelligence, roughly 25 million U.S. adults lack enough recent credit activity to generate a usable credit score, and 35% of subprime consumers have neither a credit nor store card.
By incorporating additional information, lenders are finding ways to expand the pool of available credit and approve more applicants. For example, Personify Financial reported that verified bank-transaction data increased approvals by up to 8% among underserved consumer segments while maintaining credit costs. Affirm, on the other hand, used its transformer model to extract more detail from consumers' credit histories, resulting in 3.4% more completed purchases at comparable risk.
These alternative data sources have the potential to provide a more holistic view of an applicant and could be useful across various financial offerings.
Brief written by urgent.news from PYMNTS's own syndicated text. Machine-written — may contain errors; check the original before relying on it.
