FactorTrust is looking for finance companies to add another consumer definition to their lexicon, encouraging lenders to examine the underbanked population with a new lens.
FactorTrust is advocating that the 113 million U.S. consumers with FICO credit scores currently below 700 should be recognized as CreditClimbers — consumers determined to improve their credit scores in order to advance their situation and access more credit options.
“Lenders must adjust their perception about the underbanked and no-score consumers,” FactorTrust chief executive officer Greg Rable said. “There are 26 million U.S. adults who have no credit history with the Big 3 bureaus. This is a massively underserved population that, when taking alternative credit data into account, deserve credit options."
FactorTrust’s data demonstrates these Americans indeed are striving for a better financial standing,” Rable continued. “Using alternative credit data, lenders can grow their business by strategically evaluating and marketing to CreditClimbers.”
While the percentage of unbanked consumers has decreased over the past five years, the number of underbanked consumers has remained relatively stable, according to the FDIC. Rable insisted the historical perception that the underbanked are all risky customers has harmed both consumers and finance companies, impeding industry and economic growth.
“Every time a CreditClimber does something positive, they deserve to improve their credit score,” he said. “The problem is that the vast majority of these customers and their credit performance are simply unrecognized and untracked by the Big 3 bureaus.
“We’ve seen people improve their credit scores — at every scoring level — by having alternative credit data factored in during the underwriting process. More data is better for both the consumer and the lender,” Rable went on to say.