Anyone can use alternative credit reports to provide lenders with more information about their creditworthiness. For some people, alternative credit helps them demonstrate to lenders that their poor traditional credit is only part of the story. Some others don’t have a traditional credit history at all. But for everyone, alternative credit offers a fuller picture of just how responsible and credit worthy you are.
- You’ve only had one credit card throughout your life.
- You haven’t used your credit cards often enough to build up a lengthy history.
- You’ve only taken out one or two loans.
Are you ‘underbanked’?
If you’re unfamiliar with the term, “underbanked” refers to people who have short or nonexistent credit histories. If you think this could apply to you, don’t worry you’re not alone. In fact, 26 million Americans, or about 10 percent of the U.S. population, have no credit history with the big three credit reporting agencies. There are several reasons why you may have thin-file or no-file credit.
Such situations don’t necessarily indicate that you have excessive spending habits, but they could negatively affect your credit score. Furthermore, if you don’t have a credit card at all, lenders won’t have any information to go on. They essentially have no way of telling whether you’re a risky customer or reliable one.
Anyone can have a thin-file credit report… or no credit history at all.
An immigrants credit history doesn’t travel.
People immigrating to the United States quickly discover that the U.S. credit reporting agencies don't accept credit data from their native countries. This makes it difficult for new arriving immigrants to buy cars, rent apartments, receive credit cards and obtain other necessary goods and services.
Millennials often don’t have a long enough history.
Millennials are, for the most part, new to the job market. Some may not even have credit cards or outstanding loans. For many, that means they have little to no credit history which makes it hard to get started in life.
Past troubles can create present-day hassles.
People who've had financial troubles in the past often find it difficult to acquire wealth via traditional methods. For example, if an injury sets a person back in credit card payments, he is likely to have a low credit score. But what if he needs a car to get to work? His bad credit history will prevent him from obtaining a car loan, thus hindering his ability to maintain gainful employment so he can build his credit. That can be a tough cycle to break.