How predictive scoring gives the underbanked a second chance
As the world of finance continues to advance, it becomes ever more clear that certain measurements of financial status once considered ironclad are no longer quite so cut and dry. The notion of a straightforward credit score being the key to understanding a person's past, present and future fiscal responsibility is just one of these, but it's perhaps the one with the most persistence - even though alternatives have emerged.
"Certain measurements of financial status once considered ironclad are no longer quite so cut and dried."
It's now somewhat evident that alternative credit can be a significant benefit to those that the traditional world of finance might consider to be outside its norms: the underbanked and unbanked. Yet they now constitute too much of the U.S. population to be ignored, and alternative creditors have realized this.
According to 2015 statistics from the Consumer Financial Protection Bureau, 45 million Americans didn't have a conventional credit history in 2015. (It's possible that there's been minor additions to or diminishments from that figure, of course, but the total either way is likely insignificant.)
Does this mean all of these individuals - 19 million of whom actually did have verifiable credit of some sort, but not enough to create a FICO score - don't have the regular income and financial responsibility necessary to receive and repay a loan? While lenders and merchants have every right to be careful when providing loans and credit, operating as if such a blanket statement was absolutely true would be irresponsible. It cuts them off from a new source of prospective loyal customers.
Offering new opportunities
In an age where a seemingly incalculable amount of data floats through the world at any given time, analytics experts find more and more ways to put this info to use each day. Determining the financial reliability of credit-invisible, underbanked and unbanked consumers around the world is just one of these purposes. In addition to metrics like rent, insurance and utility payments, facts such as the amount of mobile phone airtime used and upkeep of prepaid phone accounts can also serve as evidence of an individual's fiscal trustworthiness, according to Impact Alpha.
What an alternative credit report can ultimately do is offer consumers a second chance. When they've been disregarded by FICO and other credit scoring models whose methodologies are firmly inside the box, so to speak, businesses using PRBC Mainstreet can extend a helping hand to such individuals while also expanding their customer base.