New Credit Scores Are Coming to the ‘Underbanked’
As credit scores for all Americans remain weathered from the great recession and credit and lending remain tight after the freewheeling days of the pre-crisis era, a previously ignored class of borrower will now be drawn into the credit scoring system.
While credit scores are standard for anyone who has used credit in their adult lifetimes, there is a large population (and growing in number) known as the “underbanked.” Credit scores, or lack thereof, is one of the many pitfalls of being underbanked, or not serviced by traditional financial institutions.
In addition to lacking credit scores and thusly being unable to finance or lease cars, rent many apartments or qualify for home loans, the underbanked are often forced to rely on usurious services such as payday lenders, pawn shops and check cashing places to cash paychecks, borrow money or cover catastrophic incidents such as a medical setback.
But for the underbanked, Experian (one of the major credit data firms) is launching a new credit scores system with the potential to draw an additional sixty-plus million Americans who currently do not have credit scores into the credit system.
The new Extended View system covering people without credit scores will encompass non-traditional credit reporting such as rental payments, child support payments and payday lender repayment history to create a clearer picture of creditworthiness for those who do not have credit scores.
Currently, fifteen small-to-large lenders are considering adding Extended View for non-traditional credit scores to their scope of lending. As of now, borrowers cannot view their Extended View credit scores, but Experian indicates this may change once more lenders adopt the new credit scores system.