6 Types of Alternative Credit Data for Smarter Loan Decisions

The future of credit reporting and alternative data sources

Alternative credit data is becoming increasingly important for lenders in making informed loan decisions. While traditional credit scores have been the go-to metric, the inclusion of alternative data types offers several advantages. These data sources provide a more comprehensive borrower profile, allowing lenders to make better-informed decisions. Whether used as a replacement or as a complement to credit scores, alternative credit data offers valuable benefits.

Alternative Data vs. Credit Scores: Enhancing Credit Decisions

To understand the significance of alternative credit data, let’s explore its advantages over credit scores:

Up-to-date information

Credit scores are often delayed indicators of creditworthiness, providing a snapshot of a borrower’s financial state only once a month. On the other hand, alternative data, such as recent cash flow and account balances, offer real-time insights into a borrower’s financial health. By leveraging this up-to-date information, lenders can make more accurate judgments.

Added convenience

Integrating with alternative financial data providers simplifies the access to alternative data. Borrowers can effortlessly unlock all the necessary data by logging into their online banking or payroll provider during the application process. Unlike hard credit checks, this method has no negative impact on their credit score. This convenience benefits both lenders and borrowers.

Reduced costs

Traditional credit checks can cost lenders up to $50 per report. Conversely, pulling alternative data is significantly more cost-effective. When lenders can rely solely on alternative data, they can achieve substantial savings at scale. Lower costs translate to more affordable lending options for borrowers.

Greater insight

A credit report provides valuable information about past debts and repayment history, but it does not give a complete picture of a borrower’s financial health. Alternative data fills this gap by offering deeper insights into a borrower’s current financial state. It can even uncover new risk factors that traditional credit scores may overlook.

Ongoing access

Lenders can easily refresh consumer cash flow information when shared digitally. This feature allows lenders to monitor changes in cash flow, gaining access to the latest information throughout the loan decision process. Ongoing access to up-to-date data enhances the accuracy of lending decisions.

The Power of Alternative Data

Alternative data goes beyond traditional indicators and credit scores to provide lenders with a more comprehensive view of a borrower’s financial profile. For example, alternative data can reveal missed rent payments or a lack of income, which are risk factors that traditional credit scores may disregard. By incorporating alternative data into their assessments, lenders can make more informed decisions, avoiding potentially risky lending and preventing borrowers from taking on excessive debt.

Moreover, alternative data is especially beneficial for individuals with limited or no credit history. These individuals may have steady incomes and assets but lack a conventional credit report. Alternative data allows these candidates to access loans at favorable rates and start building their credit history. In the United States, an estimated 49 million people have no credit score, but many of them would qualify for loans based on alternative data.


Q: What is alternative credit data?
A: Alternative credit data refers to non-traditional sources of information that lenders use to evaluate the creditworthiness of borrowers. Examples include recent cash flow, account balances, rental payment history, and more.

Q: How does alternative credit data benefit lenders?
A: Alternative credit data provides lenders with real-time insights into a borrower’s financial state, reduces costs compared to traditional credit checks, offers a more comprehensive view of a borrower’s financial health, and allows ongoing access to up-to-date information.

Q: Can alternative credit data help individuals with no credit history?
A: Yes, alternative credit data is particularly valuable for individuals with limited or no credit history. It enables lenders to assess their creditworthiness based on alternative data sources, such as income, assets, and payment history, allowing them to access loans at favorable rates.


Alternative credit data is transforming the lending landscape by providing lenders with a more complete picture of a borrower’s financial profile. By incorporating alternative data into their loan decisions, lenders can make more informed choices, improve risk assessment, and offer better lending options to borrowers. With its ability to capture real-time information and cater to individuals with limited credit history, alternative credit data is a game-changer in the lending industry.

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