Lenders that once turned their backs on consumers that had no credit scores are now taking a look. What loan servicing companies have realized is that these low or no-score consumers are actually not the risk they were once believed to be.
The number is staggering – 64 million. That’s how many consumers are in America without an identifying number. They simply don’t have a credit score, which means they’ve been turned away for loans and for any type of credit, always. True, some of these “unscorable” consumers are actually huge risks. But far too many aren’t, which means there is a goldmine of consumers out there waiting to spend and willing to pay their monthly installments.
A leading credit scoring company called VantageScore has developed a system by which as many as half of those consumers that don’t have a score can be counted. The company has found that if they assess two years worth of credit history rather than the traditional six months, they can assess a score. Most credit scoring companies don’t look at rent or utility records, which can be a valuable and untapped source of information.
The economy is beginning to turn and household wealth is hitting all-time highs, but there is still a large segment held hostage to conservative credit practices. Loan servicing companies are tapping into this underserved demographic and opening up a new source of revenue, even the ones who are thought to be without any type of credit score at all.
VantageScore has determined that around a third of the “unscorable” population actually poses no credit risk at all, or very low credit risk. Lenders armed with this information are finding that these consumers fit their risk assessment profile of a potential customer that will pose little to no risk.
The demographic includes a large group of retirees and professionals. Around 40 percent of the demographic are homeowners, proving that a good many of the 65 million are responsible enough to keep their homes.
What the lending industry needs to consider, according to finance experts, is that more credit scoring agencies should take a look into the credit history of consumers that goes back farther than six months. FICO, for example, is the most frequently used agency to determine scores, and the agency only looks back six months.
UGA, a company that offers financial solutions including loan servicing, is one of the companies offering a deeper look into consumer credit and can offer flexible solutions to more consumers, especially the underserved demographic.