Most people do not realize the impact a good credit score can have on their lives. They will not face any problems applying for a mortgage or low-interest personal loan from commercial banks. It is even the first data officials of financial institutions check when they open a new account. However, those with hardly any credit history or a low credit score will not be so fortunate. In most cases, the commercial banks will reject their application for housing mortgages and low-interest loans. This is because these financial institutions are likely to incur bad debts by lending them the money.

What is alternative credit data?

Alternative credit data refers to information conventional credit-rating companies do not disclose in their credit reports. Generally, these corporate enterprises assess an individual’s creditworthiness from their:

  • Credit card repayment history,
  • Information their annual tax returns,
  • Details regarding loans commercial banks sanction them and their repayment history,
  • Mortgage history, and
  • The information is available on public records, especially bankruptcy applications.

The officials can readily obtain this information from commercial banks and various government agencies. They do not need the individual’s permission to collect, analyze and compile this information to generate their credit score. On the other hand, alternative credit data is generally available on various online platforms and consumer behavior software applications. The officials of these credit-rating companies need to seek the individual’s permission before using it. Only then can they compile his/her alternative credit score.

What does this data comprise?

The alternative credit data which credit-rating companies gather to generate an individual’s second credit score consist of:

  • Details of timely rental payments,
  • Information regarding timely off-line and online bill payments on the utility companies’ websites,
  • Financial indicators like the time period of their bank account, frequency of online withdrawals and deposits,
  • Records relating to the title-deeds of real-estate assets they own from websites of local authorities, and
  • Details regarding the average balance on their savings accounts and demand deposit receipts.

The companies even look into details of alternative lending schemes the individual might have in his/her name. These include payday loans, auto-title loans, rent-to-own payment schemes.


Allowing credit-rating companies to use alternative credit data can change people’s lives for the better. They can:

  • Apply for low-interest loans and mortgage which commercial banks previously deny them,
  • Information of timely utility bill payments can boost their conventional credit score by more than 20 points,
  • Many of them from marginalized sections of society can become eligible to apply for lucrative jobs,
  • They can save money on the down payment on auto loans when financiers notice their habit of making timely payments, and
  • Convince a landlord to let out a room or apartment to them on rent.

Commercial banks are gradually accepting alternative credit data as a measure of determining the creditworthiness of their borrowers. This is a boon for people with a low or virtually no credit profile. They can now become eligible to apply for low-interest loans and mortgages like other borrowers. This can help improve their livelihood and status in society. However, they need to ensure the credit-rating companies compiling the data is reliable and has integrity in the market.