Published: May 2017

Will alt data sources help the credit invisible? It depends.

As the Consumer Financial Protection Bureau (CFPB) takes a closer look at alternative data and the impact it has on those who are deemed “credit thin” or “credit invisible,” consumer advocates submit their own recommendations on the matter. While it’s true that credit invisibility poses a real problem for many, a lack of credit history could be better than negative credit history. Whether the use of alternative data in calculating credit scores is likely to help or hinder one’s access to credit will depend on the information being used, the consumer’s ability to consent to its use, and the way that creditors interpret and apply the data.

The coalition applauds the Consumer Financial Protection Bureau for exploring both the benefits and the risks of alternative data and modeling. Whether it’s the use of alternative data sources, like rental and utility payments, or behavioral data, including web browsing and social media posting, these seemingly reliable indicators of creditworthiness don’t necessarily present a complete and deserving appraisal of a consumer. When it comes to assessing alternative data sources, it’s important to remember the devil is in the details. Concerns over data accuracy, privacy and transparency should all be weighed.

Lead Organization

National Consumer Law Center (NCLC)

Other Organizations

National Consumers Law Center (on behalf of its low income clients) | California Reinvestment Coalition | Consumer Action | Consumers Union | National Association of Consumer Advocates | U.S. PIRG | Woodstock Institute | World Privacy Forum

More Information

For more information, please visit NCLC.

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Will alt data sources help the credit invisible? It depends.   (Altdatacomment.compressed.pdf)