What Is Alternative Credit Data and How Can It Help You?

What Is Alternative Credit Data and How Can It Help You?

As a simple definition, alternative credit data (ACD) is the information not included in a typically credit report. Despite the fact this data does not count towards one’s credit score, it can still assist lenders in their financial decisions, especially for young and unestablished or under-banked credit applicants.

Records regularly withheld from major financial institutions that relate to rent and utility payments can be used to extend your primary credit report. Additional documentation concerning employment history, eviction status, and/or licenses obtained may also be useful. Alternative credit data helps individuals secure loans otherwise off-limits. Even for individuals with a healthy credit score, such data may be used as supplementary, enriching the overall profile.

The best alternative credit data sources are national, accurate, objective, and predictive. In other words, data sources that are fact-checked, unbiased, unique, compliant, and recognized nationally as a credible source of information. While still separate from one’s credit history, this type of information contextualizes statements that may appear negative to some creditors.

Currently, the United States congress considers re-introducing the Credit Access and Inclusion Act as extra provisions to the Fair Credit Reporting Act. This would encourage utility and telecommunications companies to routinely submit their customers’ information. In turn, supporters of this legislation believe that the credit scores of millions will rise greatly.

Meanwhile, Canadians troubled with bad credit should think about what this means for them. If anything, this illustrates the power of alternative credit data.  Keep in mind, however, that not all major creditors will accept this form of data; but more and more firms are beginning to see its value. Remember, there are always ways to improve your credit score and looking for alternate ways to establish your creditworthiness is always a good start.