Non-traditional or alternative credit consist of forms of credit that are not normally reported to credit bureaus.
Analysis
Alternative credit includes payment histories based on apartment rentals, cellular phone service providers, utility bills, payday loans and even deposit account records at banks or credit unions. Commercial data mining companies collect data on alternative credit forms for the sale to credit bureaus and other buyers.
Classic FICO scores, VantageScores and even the NextGen scoring models omit alternative credit. However, the FICO Expansion score specifically includes alternative credit data in order to provide credit scores for the estimated 50 million unscorables in the U.S. PRBC utilizes the FICO Expansion Score to provide alternative credit scoring to lenders.
Some lenders will consider alternative credit histories as proof of creditworthiness for borrowers with thin credit files. For example, an applicant may be able to provide a letter from a landlord indicating their payment history to show their financial responsibility.
Use of alternative credit data is expected to continue to increase as lenders look for ways to more aggressively target underserved markets. These can include young adults, recently divorced adults or even those who are widowed. Additionally, many ethnic groups and recent immigrants may be able to establish credit histories by opening credit files with PRBC or other credit bureaus as they add alternative credit scoring.
