There are about 34 million people in the United States who are credit invisible or lack enough information to receive a credit score. Credit scores – especially a good one – is incredibly beneficial to secure loans, mortgages, receive discounts on insurance, have access to a larger selection of housing options and much more. Even some COVID-19 vaccination sites have used credit history to verify patient’s identity.

There are only three credit bureaus that report credit scores: Equifax, Experian, and TransUnion; and the process to generate your credit score is tightly controlled. Information that is traditionally used to calculate credit scores like mortgages, loans, current credit lines, your payment history etc. are capable of demonstrating your responsibility as a consumer. However not every consumer has a sufficient amount of this information to have a credit score calculated.  

Some have suggested using alternative data like rental payment history, utility bill information, cable bills, cellphone bills, and other data to supplement the calculation credit scores. This could expand credit access to millions of more consumers who currently do not have a score; and there is evidence to support this. 

The main barrier to incorporating alternative data is the lack of access by credit bureaus. 96% of American consumers have a cell phone while only 5% of consumers have that data in their credit bureau file. And there are more consumers that have utility payment data than auto loan data, yet credit bureaus have about 100% coverage on auto loan information while having just 2.6% coverage on utility payment information

The reason credit bureaus don’t have access to these alternative data sources is related to concerns about privacy and regulatory compliance. And while firms like FICO believe that this data, when used responsibly could be a reliable source of data, credit reporting agencies and data suppliers haven’t been incentivized to start using this information.