Getting Back to the Future of Credit

Did you know that the concept of credit has been around for over 5,000 years? While the methods for evaluating credit have evolved over time, one thing has remained constant: the better someone knows you, the more likely you are to be extended credit.

Watch this video to see how credit has become enmeshed in society.

Knowing Your Customers is Key

Traveling back in history, the moneylender on the corner most likely knew his customers quite well. Based on his relationships, he could quickly size up whether he could risk lending someone money or offering them credit. As the banking system developed, relationships remained important. Having personal relationships with your bank could ease the path to a mortgage or line of credit. Those relationships remain important today, but a full financial picture is often dependent upon technology. Traditional credit scoring models allow credit risk managers to quickly ascertain risk. 

But are you missing opportunities to offer profitable loans and services to your existing and prospective customers? There is a large group of people — 91.5 million[1], in fact — that have either a thin credit file or no credit file. Lenders can't evaluate these people with traditional credit scoring methods. So how do you manage risk and possibly expand your pool of credit-worthy customers?

Alternative Data Broadens Your View

Getting a full picture of the consumer — and not simply the snapshot in time offered by typical credit scores — should be a key part of your risk management strategy. Alternative Data from Equifax offers you an exceptional way to layer differentiated alternative data with traditional scoring methods to better determine the risk levels associated with those consumers. These data sets include options such as:

• Cell phone, utilities and pay TV
• Short-term loans
• Consumer-permissioned income, asset and payment history

The upshot is that using these sources will allow more consumers to be “seen” and offered credit. And you’ll have an effective way to expand your customer base. By gaining a true 360-degree view of today’s consumer, you can offer more options for lending and other credit services. If you’re looking for a better alternative for discovering more credit-worthy consumers, give us a call today, or visit us online. Let Equifax help you gain a more complete picture of thin file, no file and credit recovering consumers with alternative data, enabling easier identity verification and the potential for better access to credit.  

 

[1] Equifax analysis of credit activity, 2019