2022 State of Alternative Credit Data Report

July 12, 2022 by Laura Burrows

Until recently, lenders primarily used traditional data, or the data contained in Experian’s and other credit bureaus’ core credit files, for their lending-related decisions. But many businesses are proactively turning to alternative credit data – or “expanded FCRA-regulated data” 1 – to expand their lending portfolio, help underserved consumers qualify for a loan and offer customers credit on better terms.

READ MORE: What is Alternative Credit Data?

The new ‘it’ in credit

Today’s rapidly changing economic environment directly impacts consumers’ financial behavior, creating a need for businesses to gain deeper insight into creditworthiness for more precise decisioning. Alternative credit data drives greater visibility and transparency around credit inquiry and payment behaviors, helping businesses expand their customer base and improve profitability. With alternative credit data, you can:

  • Improve risk management: See the full picture of an applicant’s risk profile to uncover significant changes in creditworthiness and more easily identify risky consumers.
  • Make strategic decisions: Gain a more holistic view of stability and resiliency to more easily gauge ability to pay, better predict future behavior and deliver the best treatment option.
  • Approve more applicants: Score more consumers with speed and accuracy by layering alternative data with artificial intelligence and machine learning.

READ MORE: Powering Financial Inclusion and Access to Credit

Using alternative credit data across the lending lifecycle

Financial institutions can use alternative credit across the loan lifecycle. Many of these data sources provide access to unparalleled insights enabling faster decisions and unlocking new opportunities. Here are just a few ways that your current strategies can benefit from additional data sources:

  • Enhance marketing efforts: Better understand and segment your target audience to deliver targeted content along the consumer journey and increase the effectiveness of your cross-selling strategy.
  • Refine collections and recovery strategies: Gain a deeper understanding of overall credit risk to improve debt management, loss forecasting and recovery efforts and comply with key privacy and communication laws and regulations.
  • Combat fraud and reduce losses: More easily assess risk, identify red flags, apply fraud scores to applications with high-risk indicators and keep up with changing consumer habits and preferences.
  • Drive identity and upgrade the customer experience: Recognize and connect with consumers in more personalized, meaningful and secure ways to make confident decisions that safely accelerate customer engagement.
  • Empower opportunities through financial inclusion: Dive deeper into consumers’ profiles to facilitate first and second chances for borrowers and increase the number of profitable loans in your portfolio.

Ready for more? Read our report to discover how you can tap into the power of big data and learn key consumer insights, such as:

  • 28 million adult Americans are credit invisible.2
  • 42% of the U.S. adult population can borrow only at significantly elevated interest rates.3
  • 21% of Americans have an unsatisfied collections account.3
  • Average bankcard balances are up 6%4

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1When we refer to “Alternative Credit Data,” this refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA Data” may also apply in this instance and both can be used interchangeably.
2Oliver Wyman (2022, January) Financial Inclusion and Access to Credit.
3Experian Ascend Market Insights (2022, April).
4Experian Ascend Sandbox (2022, March 30).