How Alternative Data Is Improving Credit Access Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure

Advertiser Disclosure

We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: May 17, 2021 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Antonio Ruiz-Camacho is senior director of content for and . He has more than 20 years of international experience leading content teams, focused on consumer advice, technology and immigration. Bankrate logo

The Bankrate promise

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo

The Bankrate promise

At Bankrate, we have a mission to demystify the credit cards industry — regardless or where you are in your journey — and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to: Meet you wherever you are in your credit card journey to guide your information search and help you understand your options. Consistently provide up-to-date, reliable market information so you're well-equipped to make confident decisions. Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you. At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next. Bankrate logo

Editorial integrity

Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.

Key Principles

We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.

Editorial Independence

Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo

How we make money

You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The following post has been sponsored by our partner, FICO. The analysis and opinions in the story are our own and may not reflect the views of FICO. Building credit is not always easy when you’re first starting out, and that’s especially true if you’ve never had a credit card or loan. Fortunately, almost anyone can get approved for a , which lets you secure your line of credit with a cash deposit and have your credit movements reported to the three credit bureaus. The ability to tap into alternative data sources and bank account usage, as well as rent payments, is also helping improve credit access on a large scale—and thankfully, there is more real-time financial data than ever, leading to better-informed credit decisions for both lenders and consumers.

How alternative data is expanding credit access

Why are companies in the credit space interested in helping more people gain access to credit? Sally Taylor, general manager and vice president of Scores at FICO, said lenders can benefit from other financial data streams to help gain a more in-depth view of a person’s ability to manage a loan. Next-generation financial data could also help streamline the loan application process for lenders and enable them to facilitate more precise transactions in less time, expanding portfolios and credit access. Multiple solutions help to expand credit access with alternative data sources, including , FICO Score XD and the UltraFICO Score. The UltraFICO Score, in particular, was developed by FICO via a partnership with Experian and Finicity to help consumers improve access to credit by tapping into consumer-contributed data. With the UltraFICO Score, consumers rely on their bank accounts and regular usage to help or further illustrate their creditworthiness. FICO says the new model can enhance your FICO Score based on indicators of sound financial behavior using information like the length of time bank accounts have been open, the frequency of transactions and a history of positive account balances to help consumers build credit. This information can be read electronically by Finicity and combined with consumer credit information from Experian if available to provide an enhanced view of positive financial behavior. The result is the opportunity to increase your credit score based on data you share—even if you have a low FICO Score or no credit score at all. FICO Score XD is a similar product, although it uses other alternative data sources that can demonstrate a consumer’s financial health. Instead of relying on banking information, FICO Score XD uses payment history from telco and utility companies and public records in order to begin building credit. According to recent data, FICO Score XD gives lenders the ability to assess risk of more than 70 percent of consumers applying for credit who do not have enough credit history to receive a standard FICO Score based upon traditional credit bureau data.

Who should use these services

According to an , as many as 62 million Americans have a “thin credit file” or are considered “credit invisibles,” meaning they have very few accounts listed on their credit reports. These consumers are a key audience for alternative data products. Thanks to alternative data, those who might’ve otherwise struggled to demonstrate credit can have . For example, applying for loans or taking out lines of credit allows consumers to reach milestones such as homeownership, as well as financing purchases like cars and appliances or even everyday needs. “We’re focused on financial inclusion, and what we’ve introduced can potentially improve access to credit for the majority of Americans who participate in it,” Taylor said of the UltraFICO Score in a previous interview with . “Consumers new to credit along with those who have had previous financial distress, those groups stand to benefit the most from the new UltraFICO Score.”

Pros and cons of using alternative methods to build credit

For the most part, services like the UltraFICO Score and Experian Boost do not have any major downsides. You get a shot at having a FICO credit score using alternative data sources with these services, which you may not have without outside help. At the very most, the investment required on the consumer’s behalf is the time involved in signing up, entering some information and looking up account numbers they can add to their profile. Finally, consumers should be cautious of any fees involved in building credit using financial service providers. Users should make sure they understand data permissions as well as any fees involved in a service, while fully researching free tools or options that are available.

The bottom line

If you’re struggling to build credit using traditional methods, then you may want to take a closer look at the payments you’re making each month. If you have a bank account or pay utility bills or phone payments, then something like the UltraFICO Score, the FICO Score XD or Experian Boost could help give you a leg up. However, using alternative data to strengthen your credit history isn’t the end-all-be-all for your credit score. Alternative data can open the door and give you access to credit that lasts, but how you handle your credit from there is up to you. SHARE: Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Antonio Ruiz-Camacho is senior director of content for and . He has more than 20 years of international experience leading content teams, focused on consumer advice, technology and immigration.

Related Articles