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Lending Briefing: Lenders are adopting alternative data, but find it challenging

  • An increasing number of lenders have started to incorporate alternative data sources into their risk modeling, but many find this initiative challenging.
  • Data reliability and the costs associated with alternative data sources represent the top barriers for lenders to start using alternative data.
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Lending Briefing: Lenders are adopting alternative data, but find it challenging

Over the past few years, lenders have increasingly turned to alternative data sources — such as income verification, payday loans, bank transaction data, and cash flow underwriting — in order to gain a clearer picture of a consumer’s true creditworthiness beyond credit reports. 

Traditional data is a relic of past underwriting methodologies, and lenders know this. The vast majority believe that traditional lending data doesn’t give them a complete picture of a consumer’s creditworthiness, a new report by Nova Credit found. 

Over the past few years, lenders have increasingly turned to alternative data sources — such as income verification, payday loans, bank transaction data, and cash flow underwriting — in order to gain a clearer picture of a consumer’s true creditworthiness beyond credit reports. 

Traditional data is a relic of past underwriting methodologies, and lenders know this. The vast majority believe that traditional lending data doesn’t give them a complete picture of a consumer’s creditworthiness, a new report by Nova Credit found. 

Nowadays, an increasing number of lenders have started to incorporate alternative data sources into their risk modeling, as they provide valuable insights into a consumer’s trustworthiness in paying important expenses.


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