Anyone can use alternative credit reports to provide lenders with more information about their creditworthiness. For some people, alternative credit helps them demonstrate to lenders that their poor traditional credit is only part of the story. Some others don’t have a traditional credit history at all. But for everyone, alternative credit offers a fuller picture of just how responsible and credit worthy you are.
Are you ‘underbanked’?
If you’re unfamiliar with the term, “underbanked” refers to people who have short or nonexistent credit histories. If you think this could apply to you, you’re not alone. In fact, 26 million Americans -about 10 percent of the U.S. population - have no credit history with the big three credit reporting agencies.
There are many reasons why you may have thin-file or no-file credit.
Some reasons you may not have a traditional credit history:
- You’ve only had one credit card throughout your life.
- You haven’t used your credit cards often enough to build up a lengthy history.
- You’ve only taken out one or two loans.
While not having a traditional credit history doesn’t indicate that you have excessive spending habits, it could still negatively affect your credit score. For example, if you don’t have a credit card at all, lenders won’t have any information to go on. That means they’ll have no way of telling whether you’re a risky customer or reliable one.
Anyone can have a thin-file credit report… or no credit history at all.
An immigrant’s credit history doesn’t travel.
People immigrating to the United States quickly discover that the U.S. credit reporting agencies don't accept credit data from their native countries. This makes it difficult for new arriving immigrants to buy cars, rent apartments, receive credit cards and obtain other necessary goods and services.
Young people often don’t have a long enough history.
New to the job market a lot of younger people do not even have credit cards or outstanding loans. That means they have little to no credit history which makes it hard to get started in life.
Past troubles can create present-day hassles.
People who've had financial troubles in the past often find it difficult to acquire credit via traditional methods. This can create a downward spiral of financial struggle. For example, if an injury sets a person back in credit card payments, he is likely to have a low credit score. If that low credit score prevents him for buying a car, he will struggle to get to work on time. This hinders his ability to maintain gainful employment which would then allow him to build his credit back up. That can be a tough cycle to break.
Connect can help by giving you an alternative credit score.