The Consumer Financial Protection Bureau (CFPB) launched a public inquiry into how alternative data sources could help expand credit access for the estimated 45 million Americans who are either "credit invisible" or lack enough credit history to generate a score. Traditional credit scoring relies on payment history for debts like mortgages and credit cards — leaving out millions who simply haven't had the opportunity to build that record.
The Bureau is exploring whether unconventional data sources — such as rent payments, utility bills, and mobile phone payments — could give lenders a more complete picture of a borrower's reliability. For consumers currently locked out of mainstream credit, this could mean better access to affordable loans and a path toward building a credit history.
At the same time, the CFPB is carefully weighing the risks. Alternative data could introduce new privacy concerns, increase complexity for consumers and lenders, and potentially introduce bias if the data is inconsistent or correlated to race, ethnicity, or other protected characteristics. The inquiry seeks public feedback to better understand how to capture the benefits while protecting vulnerable populations.
Original Source Article: https://www.consumerfinance.gov/about-us/newsroom/cfpb-explores-impact-alternative-data-credit-access-consumers-who-are-credit-invisible/