BIRMINGHAM, Ala.—Consumers who have had the same cell phone number for a long time may soon find lenders looking on that favorably when they apply for a loan.
Two start-ups are using Big Data to help lenders determine credit risk. Earnest and Affirm, have created computer programs that run a detailed analysis on other factors in a consumer’s life to determine how much of a risk they may be, something that will assist consumers with limited or no credit files obtain a loan.
“These consumers find it difficult, if not impossible, to borrow from traditional lenders because the credit bureaus do not have enough information to determine their level of risk,” explained Bill Hardekopf, CEO at LowCards.com
Earnest, Affirm and numerous other startups use computer programs to create a tapestry of a consumer's online and offline behavior.
“The data points can include things as varied as social network connections and education history to the amount of money in a consumer's retirement account,” said Hardekopf. “This allows the companies to go beyond what normal credit bureaus analyze and seek out consumers who are good credit risks but might be undiscovered by traditional methods.”
Many experts expect this analysis of Big Data to be the future of analyzing credit risk, added Hardekopf. “This may eventually replace the use of the standard credit bureaus and FICO scores.”