The Benefits of Alternative Credit Scores

Did you know that roughly 26 million Americans have no credit history?

Are you part of this group? Do you have a hard time taking out loans as a result?

If so, an alternative credit score may help you to improve your finances. 

Read on to learn more about what an alternative credit score is and the benefits it has to offer.

What Is an Alternative Credit Score?

If you have a low credit score or no credit score at all, it can be hard to do a lot of things, from qualifying for loans to getting approved for an apartment rental. This is where alternative credit scores come in.

Some lenders use alternative credit scores to assess a potential borrower's reliability without relying on traditional criteria.

Rather than looking at someone's previous loan payment or credit card payment history, they might use alternative data for credit scoring, including the following: 

  • Rent payments
  • Utility payments
  • Cell phone payments
  • Shopping history
  • Property records

Some alternative credit scoring companies will also factor in a potential borrower’s education, current job, and job history to calculate their score.

Benefits of Alternative Credit Scoring

There are lots of reasons to consider a FICO score alternative, especially if you have no credit or a very low credit score. Here are some of the top benefits an alternative credit score can provide:

Higher Loan Approval Rates

When someone's credit score is based on more than just their history of making loans or credit card payments, suddenly, far more people can qualify for loans. This makes it easier for people to get the money they need right away, without having to jump through a bunch of hoops. 

Great for Young People

The traditional credit scoring model can make life very difficult for young people who are just starting out.

A young adult may have never had a credit card or taken out a loan, for example. Because of this, when they go to apply for a car loan or even to rent an apartment, they have no credit history to show that they will make their payments on time.

Alternative credit scores give lenders other types of data to reference. This increases the likelihood that young people can qualify for loans. 

Great for the Unbanked and Underbanked 

Approximately 7.1 million households in the United States are unbanked. This means they don't have access to traditional financial services from banks and credit unions.

Many more are underbanked, meaning they have access to traditional financial services but don't or are unable to use them.

For people who are unbanked and underbanked, getting approved for a loan can be almost impossible because they don't have any credit or recent credit activity.

Alternative credit scoring data gives the lender other factors to consider. This, in turn, makes it easier for unbanked and underbanked individuals to borrow money. 

Get Your Alternative Credit Score Today

Alternative credit scoring models allow a wider range of people, including young people and the unbanked and underbanked, to get approved for loans and access the money they need.

Now that you know more about the benefits of an alternative credit score, are you ready to get yours? If so, register here to create an account and get your alternative credit score today.

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