From Alternative to Imperative: 5 Reasons Why Alternative Data Is the Key to Growth

In today’s fast-paced lending environment, traditional credit scores and financial statements may not tell the full story. In fact, 76 million Americans have little-to-no credit history. That’s where alternative data comes in. It includes information like utility payments, rent history, payroll data, and even social signals, giving lenders a broader picture of an applicant’s financial health. What was once considered an “alternative” approach is now becoming an essential tool for growth and risk management.

Here are five reasons why leveraging alternative data is no longer optional. It’s imperative.

1. Your competitors are already using alternative data.

The lending landscape is evolving, and the most successful players are harnessing alternative data to make smarter decisions. If your competitors are approving more loans while maintaining risk control, they’re gaining market share while you fall behind. Businesses that don’t integrate alternative data risk losing out on qualified customers who are getting approvals elsewhere. Staying ahead means adapting to new, data-driven strategies that enable better decision-making and more competitive offerings.

2. Ignoring alternative data is leaving money on the table.

Every declined loan application due to a lack of credit history is a missed opportunity. By incorporating alternative data, 6.5 million people could become scorable. Alternative data helps identify these customers, leading to higher approval rates, increased revenue, and better operational efficiency. In a competitive market, failing to tap into this data means walking away from profitable lending opportunities.

3. Economic uncertainty demands smarter risk management.

With economic fluctuations and uncertainty becoming the norm, relying solely on traditional credit measures is risky. Alternative data allows lenders to assess a borrower’s real-time financial behaviors, providing deeper insights into their ability to repay loans. By incorporating alternative data, lenders can make more informed decisions, reducing defaults while still expanding access to credit. In today’s market, making lending decisions without the full picture is a gamble businesses can’t afford to take.

4. A better customer experience drives loyalty.

Modern consumers expect personalized and seamless financial services. When lenders rely only on traditional credit data, many customers face unnecessary barriers to approval. By incorporating alternative data, you create a smoother lending process, improving approval odds while still maintaining prudent risk management. This approach not only brings in new customers but also fosters trust and loyalty — key drivers of long-term business growth.

5. Gain a 360-degree view of the customer.

Alternative data provides a more holistic understanding of a borrower’s financial behavior. Factors like consistent rent payments or stable payroll deposits can paint a picture of financial responsibility that traditional credit reports miss. This expanded view allows lenders to serve a broader audience, and it’s available with Equifax OneScore — which offers a traditional credit history as well as differentiated alternative data. The result? A win-win: more approvals and more responsible lending.

The Bottom Line

What was once considered “alternative” is now a competitive necessity. Lenders who embrace alternative data gain access to a larger customer base, reduce risk, and optimize operations. In an uncertain economy, leveraging every available data point is crucial for sustainable growth. The choice is clear: Adapt or risk being left behind.

Are you ready to take the next step? It’s time to move alternative data from the sidelines to the center of your lending strategy.

To stay competitive and handle new challenges, lenders need better ways to make sure their decisions are based on the best information. Now, with OneScore from Equifax, they can use alternative data to find hidden risks and opportunities. Find out everything you need to know in our eBook. 

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