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No Credit Score? No Problem! Just Hand Over More Data


An auto dealership.

Some lenders are using all manner of datasuch as mileage and a used cars resale valueto gauge a potential loans risk.

Credit: An Rong Xu/The New York Times

For decades, the arbiters of creditworthiness have been two powerful groups: the Big Three credit bureaus, which keep files on roughly 200 million consumers, and score creators like FICO, which turn that raw data into a three-digit key to credit cards, car loans, mortgages and more.

But with tens of millions of consumers left out of traditional credit scoring and the pandemic exposing potential problems in the current system, established players and slick start-ups alike are collecting and crunching all manner of other data to determine who ought to get a loan and how much they should pay.

This so-called alternative credit scoring could have profound effects for consumers, many of them minorities or low-income individuals, who can be asked to hand over more intimate personal information — like their spending habits and details of their college degree — in hopes of getting a loan.

"The box for who gets a conventional credit score is pretty small, and that box hasn't been updated in a while," said Silvio Tavares, the chief executive officer of VantageScore, an established credit scorer that is owned by the big bureaus and is working on adding alternative data to its models. "Data is really a big equalizer."

From The New York Times
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