The CFPB says there are 26 million adults without a credit file, and another 19 million that don’t have enough credit history to score them using traditional scoring models. That’s 45 million consumers that have the potential to be profitable customers for you. But how do you assess their creditworthiness so you can approve the right applicants?
When we started our credit bureau in 2011, most of the alternative scoring models were available from small companies – none of the big three credit bureaus had any real offerings other than their involvement with VantageScore (which they all jointly funded). But now all the major players as well as the minor players have alternative scores that allow almost any lender to use these scores to assess creditworthiness. But they all suffer from one key issue – lack of coverage. Everybody talks about using rent and utilities as a source for scoring models, but how many landlords report tenant payments to credit bureaus? Less than 30% is the answer, which means you have very limited coverage. And how many utility companies report monthly payments to the credit bureaus? Very few, which means there’s very limited data available to drive alternative scoring models.
Is this information useful in predicting risk? All of the bureaus think so – they’ve been promoting VantageScore since 2008 which uses rent and utilities. FICO Score 8 uses utility data in the scoring model (even though it’s rarely present in the consumer’s credit file). FICO Score 9 added rent. FICO has released a new score (FICO Score XD) which also uses this data to create a new alternative score.
eCredable is different, because we engage with the consumer directly to acquire their payment history for ANY account they have. This includes rent, mobile phone, land line, satellite TV, cable TV, internet, gas, water, and power. We also use insurance payments, as well as a variety of other regular financial commitments the consumer has like child care, alimony and even remittances. We don’t have a coverage issue – the consumer grants us all the coverage we need to help them create a credit score any lender can use to assess creditworthiness, across the entire credit spectrum from deep subprime to prime.