Underwriting the Invisible: Anything but Elementary
For microlenders, the effort involved in underwriting borrowers who are unable to qualify for mainstream credit because they are credit invisible (lacking a credit history), is rigorous and time consuming. Without a traditional credit profile, lenders are forced to become detectives in order to track down information that can assist them in making a credit decision. These range from searching government websites for state and county tax liens, calling landlords and tracing addresses to obtain a renter’s history to following a non-existent paper trail for automobile and land purchases.
On top of the actual footwork to secure this information, everything then must be verified. Sometimes the information is not accurate because the customer does not have the correct details or has forgotten a particular transaction or is too ashamed to share negative information. For all these reasons, this method is time consuming and often frustrating.
Sherlock Holmes: Out of a Job?
However, there is an easier way. LexisNexis® Risk Solutions has a credit report called RiskView™. “LexisNexis is going to take away the Sherlock Holmes part of my job,” says Emi Reyes from the Latino Economic Development Center (LEDC) in Washington, D.C, who believes that thanks to RiskView™, she will have less research to do.
For many large financial institutions and sophisticated credit professionals, the idea of using nontraditional or alternative data in the credit decisioning process is not a new one. LexisNexis Risk Solutions introduced the first standalone alternative credit scoring tool nearly 20 years ago in an effort to supplement credit bureau reports and shed light on credit invisible consumers. For many small lenders, community development institutions, financial coaches, and non-profits, however, accessing critical data outside of the mainstream financial system is challenging.
Partnering for a Brighter Future through Financial Inclusion and Transparency
At this year’s Credit Builders Alliance (CBA) Symposium, LexisNexis Risk Solutions and CBA announced the availability of the LexisNexis® RiskView™ Report through CBA’s Access Program. LexisNexis Risk Solutions and CBA have partnered on a number of initiatives over the past five years with a shared mission of promoting financial inclusion and transparency to help traditionally underserved populations build strong credit and other financial assets. The latest initiative is an effort to demystify alternative data by making it more readily available to practitioners working amongst the underbanked. The program has been specifically designed with smaller institutions in mind and leverages CBA’s expertise in connecting these organizations with Credit Reporting Agencies.
The RiskView™ Report covers 99% of the population including 40 million credit bureau thin-files and no-hits. Data is drawn from over 78 billion consumer records and 10 thousand sources that reflect on an individual’s stability ability, and willingness to repay a financial obligation, including:
- Real and personal property values and sales history
- Education attributes
- Occupational licenses
- Business associations
- Address, phone, and other transient person attributes
- Sub-prime credit service solicitations
- Age and predicted income-related attributes
- Bankruptcies, liens, judgments, evictions, and criminal records
The symposium illuminated a number of the potential benefits to a more holistic and transparent credit underwriting policy. From a consumer perspective, a better understanding of all of the potential information that may go into a credit decision helps individuals better manage their financial decisions and behaviors. From a business standpoint, access to high quality alternative data allows small lenders and mission driven organizations the ability to provide more consumer-friendly products that compete directly with larger players. For more information on how to gain access to the RiskView™ Report through the CBA Access Program, please visit here.
Dara Duguay is the executive director Credit Builders Alliance. Prior to joining CBA, she was the director of Citigroup’s Office of Financial Education and founding executive director of the Jump$tart Coalition for Personal Financial Literacy.
Solomon Semere is a director of market planning at LexisNexis Risk Solutions. His role focuses on developing and executing the market strategy for the credit risk decisioning and marketing group, which includes the RiskView™, FICO Score XD, and Profile Booster products. Prior to joining LexisNexis, Solomon worked as a senior strategy and operations consultant within Deloitte Consulting and held various roles in the insurance industry.