Why You Need Alternative Credit Data

You need experience to obtain a job...but you need a job to gain experience. The same goes for credit scores. If your customers don’t have a credit score to begin with, or if their credit history has been less than ideal in the past, then it becomes near impossible for them to build up their score. Thankfully, there are alternative options to traditional credit data that you can offer your customers.

Credit scores are generally determined by the three main credit bureaus: Experian, Equifax, and TransUnion. These traditional credit reports are decided mostly by data sources such as auto loans, mortgage payments, and debt-to-income ratios. While these may be fairly reliable sources, not everyone fits the mold. Consider these two scenarios:

1. Jim is a college student studying his third year at a university. He has had a steady job since graduating high school, and he has been very efficient with saving his money. In fact, he hasn’t even had to take out a student loan. He just obtained an internship 30 minutes from his apartment, requiring him to need a car for transportation. When Jim arrived at his bank appointment, he was alarmed to find out they would not offer him the loan he desired due to the fact that he had zero credit history.
2. Ben recently graduated from college and now has a steady income. He wants to reward himself for all of his hard work and go by a 4-wheeler as a weekend toy. Ben had some history of maxing out his credit cards while in college, and even though he has a good income and better spending habits now, Ben’s low credit score is causing a denial on the $5,000 loan he wants to buy the quad.

While traditional credit reports play a large role in deciding consumer credit scores, there are alternative methods available for proving eligibility for a loan. This is known as alternative credit data.

What is Alternative Credit Data?

Alternative credit data is exactly how it sounds. It’s data on the consumer or client that comes from sources not typically found on a traditional credit report. Some examples of alternative credit data include phone bills, tuition payments, and rental payments.

While these things won’t necessarily increase one’s credit score, they will give you as the lender records to look at such as liens and judgments, bank info, and employment/income information. If your customer has a long history of paying their phone bill, school tuition, and rental payments on time, alternative credit data will help you find this information to provide the best opportunities for your clients.

With the help of alternative credit data, Jim, Catherine, and Ben are given a second chance at obtaining their loans. Whether you are the lender or the client, alternative credit data may be the solution to those tough decisions revolving around poor credit history to no history at all.

Clarity Credit Reports

Soft Pull Solutions offers lenders and financing companies the option of doing a clarity credit report. This report looks beyond traditional credit data and pulls information from alternative credit sources. With the combination of traditional and non-traditional sources, lenders are better capable of assessing the risks dependability of the consumer.

Whether your customers are like Jim with zero credit history, or in a similar situation to Catherine and Ben with poor credit history, Soft Pull Solutions can help you provide the best alternatives for your clients with Clarity Credit Reports.