How You Can Receive A Loan Without A Credit Score
Today, it is easier than ever to receive credit or borrow funds. Many people have easy access to credit cards and bank loans, and many more can go online and apply for personal loans. However, for a large subset of the population, borrowing funds is difficult considering these individuals have no credit score or record with the major credit bureaus. Millennials, whose distrust of credit and traditional banking has been well documented, and for many people living in lower income areas have a more challenging time gaining access to funds because of their lack of credit history.
However, new technologies and outside-the-box thinking by entrepreneurs and traditional lenders have contributed to create new systems that allow those without credit to gain access to the funding they need. With systems such as social credit, and even by checking people’s phone usage, banks and other institutional lenders can now extend credit to more potential borrowers than ever before.
Your Credit Through a Facebook Post
One of the most interesting developments in financial technology has not been the number of innovations intended to help major financial institutions, but rather those made to improve the access to tools average consumers need. One such development has come in the form of new systems designed to help those borrowers traditionally marginalized by institutional, and even non-traditional lenders.
Today, more and more people live without having a credit score, either because they have not developed one, or because they live in areas where traditional credit is hard to access. However, more and more companies are discovering that by finding ways of extending opportunities to these populations, they can help them create and build their credit scores. The added benefit is tapping formerly untapped markets to improve profitability and grow market share.
As such, companies have created new paradigms to determine a person’s creditworthiness that do not focus on the traditional and sometimes biased indicators used to generate credit scores. One of the most popular and cutting-edge means has been to focus on individuals’ mobile phone usage. All three major credit bureaus have tried out these systems around the world, with positive results.
These new paradigms focus on the number of calls and text messages received, which many in the industry argue is a way of determining a potential borrowers’ degree of economic activity. Other methods include sending questionnaires designed to examine a person’s borrowing and financial habits.
Another way lenders have sought to expand their services to those without credit is by examining their social media presence to create something called a “social credit score”. These methods look at everything from users’ posts on Facebook, Twitter, and LinkedIn, to their connections and social networks.
While there are obviously concerns about privacy, it is important to note that most of these services must be opted into, meaning that these companies will not analyze random users’ data without their approval and permission.
Opening the Gates to Credit
By changing the way companies determine creditworthiness, these new technologies can revolutionize the way people access financing. These new tools have substantial potential to help people in underprivileged areas with no access to banks or traditional lenders, or simply those young enough to not have any credit foundation to build upon. Additionally, they allow for a more organic examination of someone’s credit and repayment ability. By moving away from outdated paradigms, the financial technology industry can change the world looks at credit, and how people gain access to the funding they need to succeed.