Reaching Deeper: Using Alternative Data Sources to Increase the Efficacy of Credit Scoring

With consumer debt levels at an all-time high and the credit card and mortgage markets heavily saturated, the financial services industry has begun to turn its attention to the vast untapped pool of consumers who have minimal credit histories but aren’t necessarily poor credit risks. While estimates vary, as many as 70 million Americans are believed to have “thin files,” or no credit files at all, making it difficult to use traditional credit scoring to underwrite them. These consumers tend to be grouped in minority, poor and other low income populations; the elderly, recent widows and new immigrants are also important segments within this “thin file” group of underbanked consumers.