What is alternative credit?

Despite the vast accomplishments of the American credit system, approximately 35 million to 54 million Americans remain outside the credit mainstream. These individuals are unable to access credit, or credit at competitive rates, because of the lack of traditional information, such as mortgage and credit card payments, available on their credit files. However, the recent report by the Political Economic Research Council and Brookings' Urban Markets Initiative "Give Credit Where Credit is Due" provides evidence that the inclusion of alternative data on credit-like payments, such as rent and utility payments, in credit reporting can help bridge this information gap. The first step toward filling this gap requires a systematic report of data to the major credit bureaus.

"Alternative" or "nontraditional" data includes payment obligations such as rent (Renter’s Credit Process), gas, electric, insurance, and other recurring obligations, to evaluate the risk profile of a potential borrower. The use of alternative data in consumer (and commercial) credit reports can close an information gap that has negatively affected the lives of millions of thin-file and unscoreable Americans who reside in urban areas and elsewhere.