The need for more inclusive data sources

CFPB and credit invisibles

A recent study by the Consumer Financial Protection Bureau (CFPB) found that American consumers establish credit differently depending on their economic background. The study revealed that:

  • Consumers in lower-income areas are 240% more likely to become credit visible due to negative information, such as a debt in collection.
  • Those in higher-income areas become credit visible in a more positive way. For example, these consumers are 30% more likely to become credit visible through the use of a credit card.
  • The percentage of consumers transitioning to credit visibility due to student loans more than doubled in the last 10 years.

Policymakers can make it easier for consumers to become more credit visible by clearly defining the term alternative data and supporting the use of alternative data sources that meet legal and societal standards for accuracy, validity, predictability and fairness.

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