What is Alternative Credit Data?
Alternative credit data looks beyond conventional credit bureau data, which typically focuses on credit activity such as credit card, mortgage, and auto lending. Alternative data in the ID Network® includes insights from the wireless, banking, peer-to-peer lending, checking and savings, and sub-prime markets. These non-traditional credit behaviors, when paired with the traditional credit behaviors currently used in conventional credit scores, deliver a more complete view into a consumer’s credit worthiness.
The use of alternative credit data is not a new concept in consumer credit assessment. ID Analytics has been providing credit scores which consider non-traditional credit insights to our customers since 2007, with proven results in portfolio growth without increased risk.
See Opportunity Where Others See Risk
Alternative credit data provides a broader view of a consumer’s credit behavior beyond financial services accounts into other industries and payment vehicle types. This comprehensive and current visibility into consumer risk allows you to deliver smart, optimized offers for credit and services.
By evaluating non-traditional credit activities like wireless relationships, sub-prime lending, and online lending, lenders have the ability to develop a more complete credit assessment for nearly every U.S. consumer. This is extremely critical in today’s lending environment as competition for new customers is fierce and a growing number of consumers are “credit invisible” — meaning they don’t have an established credit file with the national consumer reporting agencies.
The absence of credit history or a previously damaged credit score do not necessarily equate to a high credit risk. When alternative credit data is combined with advanced analytic models, it produces a credit assessment that is both highly predictive and strongly uncorrelated with traditional credit scores. This incremental, predictive evaluation allows lenders to form the comprehensive picture of an individual’s creditworthiness needed to improve the credit decisions, including prescreen, approval, credit line, and account management, which impact a lender’s bottom line.
An improved understanding of consumer credit risk helps you see opportunity where others simply see risk.
Benefits of Non-Traditional Credit Sources
The key to better lending decisions is incremental predictive insights. Using scoring models based on a combination of traditional and alternative credit data allows you to:
- Improve credit decisions on the margin, by more effectively evaluating borderline applicants
- Grow approval rates, by identifying off-margin consumers underestimated by credit bureau scores
- Seize opportunities to turn credit invisibles – underbanked, thin-file, and no-file — into valuable customers
- Improve account opening rates and profitability by extending more accurate pricing and terms to consumers misclassified by traditional credit assessments
It is important to remember that credit solutions have no value – no matter their predictive strength – if they can’t pass through today’s stringent model governance and compliance assessments. All ID Analytics solutions are purpose-built to address regulatory requirements – including comprehensive fair lending standards and regulations compliance reviews.