Lenders who aren’t tapping into underserved markets are leaving money on the table, but by leveraging alternative data sources financiers can expand their consumer base while helping to improve financial inclusion.  

“For lenders to have a true view of the risk tied to lending to a particular consumer, they must look beyond a borrower’s credit score”, Rikard Bandebo, executive vice president and chief product officer of VantageScore, a credit risk modeling and analytics provider, said Wednesday during FinovateFall in New York City.  

Currently, a credit score reflects items such as a borrower’s payment track record and length of credit history but does not provide all the information needed for lenders to “score people fairly,” Bandebo said.  

“Income is probably one of the most important factors, not just the amount but the stability of that income and where it is coming from makes a massive difference,” he said, noting it is also crucial to understand a borrower’s assets, liabilities and cash flow. “In an ideal world, if we want to try to make lending decisions on individuals, we’d really like to have a good view across those three areas.” 

‘Big impact’ 

“Leveraging millions of consumers’ checking and savings account data, such as checking and debit account histories and credit file details, VantageScore was able to adjust its scoring models”, Bandebo said. 

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This article was originally published on Auto Finance News on September 18, 2022._alternative data