6 types of alternative credit data for better loan decisions | Plaid (2024)

FAQs

What is alternative data for credit score? ›

Alternative credit includes information like rent payment history, gig economy income, utility bill payments, childcare payments, and more. Alternative credit scoring can increase loan approval rates, as credit reports fail to paint the full picture of a borrower's creditworthiness.

Alternative credit involves lending outside of traditional financial organizations like major banks. Alternative lending includes peer-to-peer loans and equipment loans. — Getty Images/kate_sept2004. Many small businesses struggle to get the funding they need to launch and grow.

The best credit scoring model depends on the lender and borrower's needs. FICO and VantageScore are the most commonly used in the US, based on factors such as payment history, credit utilization, and credit inquiries. However, credit scoring models are only one factor in credit decisions.

Examples of alternative data sets include credit card transaction data, mobile device data, IoT sensor data, satellite imagery, social media sentiment, product reviews, weather data, web traffic, app usage and ESG (environmental, social and corporate governance) data.

Alternative credits are ways students can earn credits that count towards a degree, without being enrolled full-time in a four-year, in-person college.

A: A credit report is a record of your credit history that includes information about: Your identity. Your name, address, full or partial Social Security number, date of birth, and possibly employment information. Your existing credit.

Character, capacity, capital, collateral and conditions are the 5 C's of credit. Lenders may look at the 5 C's when considering credit applications. Understanding the 5 C's could help you boost your creditworthiness, making it easier to qualify for the credit you apply for.

Lenders also use these five Cs—character, capacity, capital, collateral, and conditions—to set your loan rates and loan terms.

Alternative credit data, also known as expanded FCRA-regulated data, is data that can help you evaluate creditworthiness but isn't included in traditional credit reports. To comply with the Fair Credit Reporting Act (FCRA), alternative credit data must be displayable, disputable and correctable.

What is alternate data for credit underwriting? ›

Alternative credit underwriting data refers to information not typically used in the traditional credit underwriting process. This can include data from rental payments, telecom and mobile data, online shopping behavior, utility payments, social media activity, public records, etc.

Alternative Credit is a strategy focused on investments in large, diversified portfolios of credit assets such as portfolios of loans, leases, financial receivables, fees or royalties. This is sometimes also called asset-based credit.

Payday loans, auto title loans, and credit card cash advances are three of the costliest ways to borrow cash.

Simply put, there is no “more accurate” score when it comes down to receiving your score from the major credit bureaus.

Examples of Alternative Credit Data include rental payment history, utility payment history, and mobile phone payment history. Alternative Credit Data is used by lenders and financial institutions to assess the creditworthiness of individuals who have limited or no traditional credit history.

Alternative credit scoring collates reliable data across a number of points to determine whether the applicant has the means and the intention to repay the loan. A customer's online presence, otherwise known as their digital footprint, can be a powerful form of alternative data for credit scoring models.

Alternative credit scores help lenders accurately score more consumers — identifying creditworthy borrowers who might otherwise be automatically denied because they don't qualify for traditional credit scores. The increased access to credit may also align with lenders' financial inclusion goals.