In the personal finance world, it has long been known that there are creditworthy people who do not have a credit score. Traditional lenders typically do not deal with these customers, so they had to resort to payday loans and lenders who charged high interest rates. A new proposal to allow banks to share deposit information for credit evaluations could alleviate this problem.
The Wall Street Journal reported that JPMorgan Chase, Wells Fargo and US Bankcorp are among the banks that will begin to share information about their deposit customers so that they can get credit at other lenders. Right now, these banks are willing to extend credit to their own customers who have shown that they can manage deposit accounts successfully. By sharing data, lenders can make better decisions that will help more borrowers, which will help grow the economy.
Fair Isaac Corporation, which operates a major credit bureau, estimates that 53 million Americans have no credit score. Credit scores are based on how people use credit, so those who have never used it often have no score. This includes people who prefer to pay by cash or debit card as well as people who have moved to the United States from other countries. This group of consumers cannot get credit cards, have trouble renting apartments and buying houses. They may even be turned down for certain jobs despite the fact their spending habits may show that they are unusually fiscally responsible.
Access to credit can also help give people without credit scores financial flexibility without affecting the status of the current credit rating agencies. In addition, it creates a new source of business for the banks, who recently reported the lowest credit card debt since 2000.
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