By Kathryn J. Davis, President/CEO of BALANCE

Today 45 million Americans are either credit invisible and have no credit score or their credit is so bad no one will lend to them at reasonable interest rates. It’s been reported if immigrants were included in this number, we would be looking at closer to 70 million consumers who are being left out of mainstream lending due to some type of credit issue. In my home state of California we have nine million consumers that fit that description – the largest number of consumers in any state that are left out of mainstream lending. It makes me wonder, how is it that they get by on a daily basis without access to credit?

I don’t know about you, but it’s rare that I see anyone at a store pay with cash, let alone an old school paper check! Studies and reports have shown that this segment of the consumer population is paying close to $200K more in fees over their life time for access to alternative banking products and services. I know these aren’t credit union members and they should be!

Work with us to find new ways of serving more members! We invite you to join the Underground Community.

The concept of credit has been around for a very long time - has it become dated in its application? Are we missing a key opportunity to serve members in our community? FICO, believe it or not has been around since the late 1950’s, with it becoming more mainstream by the late 1980s. I think we can all agree a few things have changed since that time! While the modeling and scoring around credit does and has continued to evolve, it’s quite evident if 45 million consumers are left out, perhaps something is missing from the score we all use to determine who receives credit.

In the past decade, there has been a lot of work and research done around using alternative data to determine the creditworthiness of a consumer. In fact, some research has even suggested adding this data to traditional credit files to boost scores. For example, the inclusion of rent, phone, or other utility payments would be an excellent indicator of payment history, as would the addition of tracking any form of electronic payment.

I have a babysitter that only wants to be paid by Venmo. If that data isn’t being picked up in her profile I think someone is missing out on making her a lending offer with all of that extra cash she brings in every month from all of her clients. – Kathryn Davis

Several fintechs have built lending products on their ability to track how consumers are spending and receiving money to determine patterns of predictability. These insights are being used to make credit decisions for a wide variety of consumers. This data could also be useful in making offers of credit to millennials. Many millennials are not even using credit cards and rather are using other forms of electronic currency. For example, I have a babysitter that only wants to be paid by Venmo. If that data isn’t being picked up in her profile I think someone is missing out on making her a lending offer with all of that extra cash she brings in every month from all of her clients! She very well could be one of the credit invisible Americans given that she predominantly fits into the gig economy when it comes to employment.

Bottom line, if you’re only relying on traditional credit reports to make credit decisions you are missing out on serving existing and potential members. Today there are so many opportunities to either purchase alternative data or work with bureaus that have created products involving this type of data. Historically this segment of the population has been viewed as undesirable to lend to, but as the times continue to evolve, they just might be a great new member who could really use your help. #PeopleHelpingPeople