Kamala Harris Fights 'For The People' To Fix Credit Scores
By Mark B. Huntley, Esq.
Last updated 7/16/2019
Summary: United States Senator Kamala Harris announced that she wanted alternative payment data added to consumers credit files as part of her 2020 Presidential platform. From the leading white paper studies on this issue, I have compiled 28 mind-blowing statistics shedding new light on the injustice of credit scores.
For years, scholars, industry experts, national credit agencies, think tanks, and even marketing companies; have clamored for the addition of alternative payment data to consumer credit files.
Senator Kamala Harris understands that 45 million Americans do not have access to credit because they have never had credit, barely have any credit, or it's been a long time since they have had credit.
This group of American's are commonly referred to as Credit Invisibles or the Unscorables. These statistics tell their story...
Alternative Data White Paper Studies
The following studies were used to compile the below statistics and quotes on the effects of alternative data upon the credit invisible and unscorable.
A large number of the quoted statistics are independently duplicated within each of the studies which made data verification easy.
In many cases I extrapolated data from multiple of the below cited sources to produce the statistical quotes.
The following alternative data studies were used in compiling the below 28 mind-blowing statistical quotes in support of Senator Kamala Harris' fight for the invisibles and unscorables of America.
Leading Alternative Data Studies
'Who are the credit invisible?' Consumer Financial Protection Bureau (2016).
'The Scoring of America: How Secret Consumer Scores Threaten Your Privacy and Your Future' World Privacy Forum (2014).
'Report on the use of remittance histories in credit scoring' Consumer Finance Protection Bureau (2014).
'An Overview of Consumer Data and Credit Reporting.' Federal Reserve Bank (2003).
'Full Utility Credit Reporting: Risks to Low Income Consumers' National Consumer Law Center (2009).
'S.3040 - Credit Access and Inclusion Act of 2018' 115th Congress (2017-2018).
'Truth Squad: Does VantageScore Use Alternative Data?' FICO Blog (2017).
'Alternative Data and Fair Lending' Lexis Nexis (2013).
'Community Dividend' Minneapolis Federal Reserve Bank (2008).
'Who are the credit invisibles? How to help people with limited credit histories.' Consumer Financial Protection Bureau (2016).
'Give credit where credit is due. Increasing access to affordable mainstream credit using alternative data.' Political and Economic Research Council The Brookings Institution Urban Markets Initiative (2016).
'VantageScore 3.0 White Paper.' VantageScore (2013).
'Knowing the Score: New Data, Underwriting, and Marketing in the Consumer Credit Marketplace' Ford Foundation (2014).
'Literature Review: The Credit-Enhancing Functions of Downpayment and Downpayment Substitutes' U.S. Department of Housing and Urban Development (2017).
'AN OVERVIEW OF THE CREDIT BUREAUS AND THE FAIR CREDIT REPORTING ACT' 115th Congress (2018).
Fight For The Invisibles - 28 Mind-Blowing Statistics
"45 million American’s are Credit Invisible or Unscorable."
“26 million people are Credit Invisible.”
Mainstream alternative data like payment-related information, such as regular bill payments are some of the best evidence that thin-file and no-file consumers have of their ability to repay financial obligations.
With the addition of the 45 million credit invisible American’s into the NCRAs databases, the predictive model would be more accurate and would lower utility serious delinquency rates by 22% and telecom serious delinquency rates by 28% for lender’s taking the same credit risk tolerance.
“38 million of those American's who are Credit Invisible or Unscorable are Black and Hispanic minorities.”
"VantageScore can generate scores for 30-35 million previously unscorable consumers because alternative data is included, if it is available on the credit file, ultimately expanding a whole new universe of potential customers for lenders."
"19 million of American’s credit files are unscorable."
“30% of consumers who live in low-income neighborhoods are credit invisible.”
The majority of energy utilities and telecommunications companies do not fully report customer payment data to credit bureaus. However, 89% of utility companies and telecommunications companies referred delinquencies and defaults to collections agencies, and most were aware that these accounts would then be reported (negatively) to the credit reporting agencies.
Credit-under-served consumers often end up paying high rates, fees, and down payments; as their only option is to turn to payday lenders and check-cashing services that charge effective interest rates as high as 500 percent.
“10 million credit files are unscorable because their file is too thin or has insufficient credit history.”
"41% (38 million) of the Black and Hispanic minority population are credit invisible and unscorable, compared to 14% of the white and Asian population in the U.S."
"9 million consumer are unscorable for stale files or lack any recent credit history."
“Only 2.4% (about 7 million) of all consumers credit agency files contain utility payments.”
7% of the U.S. population’s tradelines are telecom related, however, the black population’s average number of telecom tradelines is nearly double at 13%.
64% of credit invisible minorities represent a low-risk population that is likely to be good and profitable customers for lenders and credit card issuers.
“Only 7 million (2.5%) of all consumers credit bureau files contain telephone payment info.”
"Black and Hispanic minorities have a disproportionately higher number of utility and telecom tradelines than the rest of the U.S. population."
“Alternative data composed less than 1% of all tradelines at the three big credit agencies in 2016.”
“Under 5% of all credit files have one or more alternative tradelines in a major credit bureaus database.”
45% of America’s Credit Invisibles and Unscorables live in low income neighborhoods compared to only 9% of them living in high-income areas.
If all unscorable minorities were scored with alternative data as many as 23% (11 million) would be non-prime or fair credit eligible.
“80% of unscorable thin files become scorable with the inclusion of alternative data.”
"If alternative data was used, 1 in 4 minorities could transition from unscorable to a fair or higher credit score."
“15% of American’s living in impoverished areas have unscorable credit files.”
“45% of adult American’s living in low-income neighborhoods are Credit Invisible or Unscorable.”
64% of individuals who are unscorable would move up an entire credit tier if alternative data was included in their credit file.
72% of utility and telecom companies that fully report customer payment data said the benefits were far greater than the cost.