Gain a more robust view of an applicant’s creditworthiness

Lenders are turning to alternative data to improve credit assessment confidence and fuel portfolio growth.

According to the recent Aite report, Alternative Data and Artificial Intelligence: Critical Tools in the Lending Toolbox, 71% of lenders expect delinquencies to rise over the next year after government forbearance programs wane.

Equally troubling, lenders believe they are missing out on indicators of hidden risk and these blind spots expose them to greater loss. Nearly half of lenders (48%) report they have less confidence relative to a year ago in decisioning based on traditional credit data and scores according to the same Aite report.

With uncertainly growing, interest in the use of alternative data is expanding. Alternative data—defined as data that is typically outside the scope of traditional credit files—can be used to identify creditworthy consumers who may otherwise be overlooked. That is important, since more than half of U.S. consumers lack a traditional credit score or have one that falls below the prime threshold.

Rather than focus narrowly on repayment history, bankcard utilization or 30-day delinquencies, alternative data strikes right to the core of a person’s upward or downward financial trajectory. It takes into account behavioral predicators such as education history, professional licenses, asset ownership, rent payment and more. When alternative data is used by itself or in combination with traditional credit card data, a more complete and often more robust view of an applicant’s creditworthiness emerges.

During these times of less clarity and more risk, financial institutions increasingly need useful, additive insights. By deriving critical insights through quality alternative data, lenders become well positioned to confidently move forward and build market shares while actualizing their inclusion strategies.

This white paper is presented by LexisNexis® Risk Solutions on behalf of the author. The opinions may not represent the opinions of LexisNexis Risk Solutions. This document is for educational purposes only and does not guarantee the functionality or features of LexisNexis Risk Solutions products identified.