By Hao-Che Hsu
For many, small-dollar loans offer a vital lifeline to help make ends meet and cover emergency expenses; according to the CFPB, each year millions of Americans rely on nearly $90 billion in small-dollar loans, typically between $300 and $5,000. Yet, for “thin” and “no-file” borrowers, people who do not have sufficient credit data to be evaluated by mainstream reporting agencies, gaining access to such loans is difficult. Increasingly, credit bureaus are utilizing alternative sources of data to gain a more accurate picture of creditworthy individuals who may otherwise be excluded from lending– things like rent, utilities, and phone and cable bills. In 2017, TransUnion acquired FactorTrust, a company that aggregates data about short-term loans. In the same year, Experian acquired Clarity and in 2018 Equifax acquired DataX.
In collaboration with the Deep Data Lab at UC Irvine and other researchers, these shifts have been visualized on the Alternative Loan Lab (ALL) site. ALL provides a nationwide visualization of the demographics of alternative credit loan applicants and the loan statistics from 2015 to 2020 (crucially covering the outbreak of the COVID-19 pandemic). Based on credit data obtained from Experian, the 2% random sample comprises 1,498,188 unique applicants and is visualized at a state and county level.
This research offers vital insight into the use of alternative credit by underbanked individuals, and is publicly available to allow for use by community based organizations, journalists, and other researchers.
Visit https://www.alternativecreditlab.org to explore the map and learn more!