Many unbanked and underbanked consumers don’t have credit cards and other traditional loans. Others operate on a cash-basis only and don’t carry debt at all. This happens despite there being plenty of financially responsible consumers who pay their bills on time. They just don’t have a traditional credit history, and they should be given the chance to participate in the financial mainstream.
To give a chance to millions of such Americans who have poor, little or no credit history, FICO (Fair Issac Corporation), in collaboration with LexisNexis and Equifax rolled out a new credit options program that will help many such people applying for credit cards, home and auto loans.
The program will be based on non-traditional criteria to identify creditworthy consumers. It will consider the payment history profile based on property records plus a person’s telephone and utility bills. This program will allow 12 of the largest credit card issuers in the U.S. to use alternative data to identify creditworthy individuals who would otherwise be unlikely to obtain traditional credit. In contrast, the traditional FICO scores were mainly based on payment history, credit utilization, credit history, new credit and types of credit in the ratio of 35:30:15:10:10 respectively.
Data, such as property records, telecommunications and utility information, can reliably be used to score 15 million consumers who do not have enough credit data to generate FICO scores, according to The Wall Street Journal. By using alternative data from LexisNexis and Equifax, FICO will give card issuers a FICO score that complies with regulations which they can use to extend credit responsibly to millions of additional people. FICO’s focus is on expanding access to credit, not simply scoring more people. It will give a fair chance to those who are looking for their first traditional credit product.
This new FICO score is engineered to work alongside existing FICO scores. Credit card issuers, auto loan lenders and an increasing number of mortgage lenders frequently will approve borrowers who have a standard FICO score of more than 620. This suggests that the new score could help identify people who can handle debt responsibly but have previously been shut out of getting financing.
Over recent years, credit card issuers across the country have pushed their card offerings harder as they look for ways to nullify the negative impact of increased regulatory oversight and low interest rates on their card revenues. Credit card loans are arguably the most lucrative of the loans in a bank’s portfolio because of the high interest rates that they demand – something that more than makes up for the unsecured nature of this credit line. However, the intense competition among incumbents in the industry has seen them relaxing their lending criteria to be able to grow their customer base. This is evident from the fact that the FICO credit score threshold has been reduced from 650 to 620 by almost all these lenders in recent years.
The advantage of this new system is that it provides lenders a tool to identify the risk profile of potential customers. It can help lenders in two ways: firstly, the addition to their customer base will enhance the growth in their card balances. And secondly, as these customers are ineligible for cards and loans under the traditional credit score system, the lender can levy higher fees and interest rates on them. On the negative side, these customers are more likely to default on their loans. This will add to the lenders’ charge-off figures, and will also force them to incur higher personnel-related costs linked to collections and recoveries.
Popular Posts
Want Actionable Information, Tools and Resources To Quickly Acquire Business Capital, Credit and Funding?
I take tremendous pride in building positive and lasting relationships in my businesses and personal life. Every member of my team is committed to helping our clients get the maximum amount of funding possible and achieve their highest growth potential.
have a question?
Our business experts are available to answer questions Monday - Friday from 9:00 a.m. - 6:00 p.m. EST
Call Us:
(800) 996-0270
Email Us:
service@fundandgrow.com
Watch our business credit webinar:
Obtain $250,000 Business Credit
Let's Stay Connected on Social Media!
For over 15 years, Fund&Grow has helped 30,000+ business owners get access to over 1.6 Billion dollars of business funding. We're on a mission to empower the small business owner by helping them tap into the smartest form of funding: Unsecured Business Credit – so that they can achieve their goals and dreams.
"Fund&Grow was created to empower small business owners, but more importantly, to support entreprenuers in achieving their business and personal goals while they lead the way towards innovation." - Ari Page CEO of Fund&Grow
Ari Page and the Fund&Grow team help business owners obtain access to credit despite the ambiguous lending climate. Many people feel ripped off and scammed by the bank bailouts and wonder why they can't use the system to their advantage the way the big banks did. If you have good credit, the Fund&Grow program will get you the funds you need to grow your business.
Find 4,000+ 4.9-star average customer testimonials on the following platforms: SoTellUs, Trustpilot, Google, BBB, among others.
All credit is subject to lender approval based upon credit criteria. Up to $250,000 in business credit is for highly qualified clients over the term of the membership with multiple credit card batches and/or credit lines. Introductory rates of 0% apply to purchases and/or balance transfers after which it reverts to an interest rate, which varies by lender as disclosed in the lending agreement. Fund&Grow is not a lender.
© 2025 Fund&Grow. All Rights Reserved.