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> Posted by Eric Zuehlke, Web and Communications Director, CFI

Imagine you’re a young immigrant in the U.S. who’s been working for a few years in a series of low-wage jobs. Through discipline and determination, you’ve saved up some money for a down payment on a used car and you want to apply for a loan. You haven’t made many large purchases, you don’t have a credit card, and have few assets to your name. Chances are, your credit report is nonexistent and you won’t be able to access the credit you need to buy a car that will get you to your new job everyday. Tough luck.

It’s a familiar story for the “credit invisible” – tens of millions of Americans (possibly as many as 1 in 4) – some young, some elderly, and across income levels. For people without a detailed credit report or credit score, high cost lenders such as pawn shops, pay-day lenders, and check cashing services fill the void. The resulting inability to build assets, buy a home or start a business doesn’t just have implications for individuals; the lack of a ladder for climbing up the economic ladder helps entrench economic inequality.

A new research report from the Policy & Economic Research Council (PERC) indicates that the use of alternative data is presenting an opportunity for financial inclusion. A growing number of companies are using non-financial services data such as energy utilities, telecoms and cable TV history, and rent to determine credit worthiness and reach clients that typically would be financially excluded. Read the rest of this entry »