eTopical Precious Finds
A strong credit score is important when it comes to taking advantage of financial opportunities. Unfortunately, many Americans are thin file, meaning that they have limited credit history, or credit invisible, meaning that they do not have a traditional credit file.
This problem worsens when it comes to credit card debt. 57% of Americans could not pay an unexpected expense from their savings and may instead turn to credit cards, family or friends, or personal loans. This has led to 1 in 3 Americans having more credit card debt than emergency savings.
Credit invisibility leads to higher costs overall. For instance, compared to consumers with prime credit scores, consumers with subprime credit scores pay $3,000 more in interest for a $10,000 used-car loan over four years.
With this in mind, it becomes clear that credit invisibility can hinder individuals in finding financial freedom. However, there are other options. Alternative data is one such option, providing a more holistic view of consumer behavior. This data focuses on what happens outside of the traditional consumer credit file, highlighting things like short term loans, telecommunications, and utility payment history.
Equifax is a company that is dedicated to leveraging alternative credit to help individuals reach a higher credit score. It predicts that alternative data could bring 8.4 million Americans into a scorable credit band, making a significant impact in their lives. Exploring alternative data is useful in broadening financial opportunities, and is important to consider as an option.
