will soon give consumers the option to let lenders review their electric, phone and cable payment information, the latest move aimed at providing financial firms more data to determine whether to approve loan applicants. Equifax, one of the largest U.S. credit-reporting firms, is partnering with Urjanet Inc., a data aggregator that receives payment information from roughly 6,500 utility, phone and other companies. By around early next year, banks and other lenders will be able to ask consumers if they want to supplement their Equifax credit report with this data.
Banks have spent much of the past decade making loans to ultra-creditworthy borrowers, but that pool is limited. Lenders have been asking Equifax and other credit-reporting and -scoring firms to help them find new borrowers, often by factoring in new data. Some big banks are already considering consumers’ electric and phone bills when deciding whether to approve them for loans. Other firms are experimenting with more unusual metrics, like whether loan applicants shop at discount stores.
The Equifax move and other credit-industry changes in large part are aimed at assessing people who have no credit reports or scores—or low scores. Critics say the changes could make risky consumers appear safer than they actually are. But Equifax says some consumers—such as loan applicants who are new to the U.S. or pay for most expenses with cash—simply don’t have traditional borrowing backgrounds. Equifax said the purpose of this new data “is not to extend credit universally,” but “to shed light on creditworthy applicants who are currently credit invisible and those with limited credit histories.” The data won’t be added into a consumer’s credit report but will be provided to the lender alongside it. For decades, credit-reporting firms like Equifax and
PLC have sold to lenders credit reports that mostly comprised consumers’ history of repaying their debts. But Experian, for example, said last year it would begin adding utility and cellphone data to its credit reports for certain consumers.
last year announced a new score that factors in how consumers manage their bank accounts and is intended to reward those who maintain at least a few hundred dollars and don’t overdraw. The company’s widely used FICO scores are calculated based on information in consumers’ credit reports. Each of these developments has given consumers more of a say in what lenders consider when reviewing loan applications. With the Equifax move, lenders will be able to ask loan seekers for access to their utility and other payment information. Gas, water and internet bills can also be factored in. Lenders might ask to look at this data in cases where a person’s credit report or score doesn’t exist or isn’t good enough to get approved for a loan. If the consumer agrees, lenders will be able to see information such as whether the applicant pays bills on time and in full. The data can include both positive and negative information covering at least 12 months of a consumer’s payment history. Write to AnnaMaria Andriotis at firstname.lastname@example.org
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