Monthly Archives: February 2014

How Lenders Verify Credit Through Non Traditional Channels

Most if not all lenders will look into your credit history to determine if you are worth the risk of a loan, and to determine what interest rate any loan they might give you should be. The better your credit history, the higher the chance that you will be approved for a loan with a good rate. The main source of information regarding your credit history is your credit bureau report. There are three major credit bureau report agencies, Experian, Equifax and Transunion. The higher your score, the better rate you will get with a loan and the higher the chance is that any loan you apply for will be approved. Lenders can see not only your credit score via a credit report, but also how many loans you have applied for. With every application for a loan or credit card, your credit report will record another inquiry. Each inquiry will slightly lower your credit score temporarily.

Online loans today however often use more than just traditional credit bureau reports. Online loan companies have evolved quicker than traditional brick and motor loan lenders such as banks. More and more today, lenders are also turning to non traditional methods to determine someones risk factor in deciding to provide a borrower with a loan or not. Many lenders are now processing digital records like the history of a borrower’s phone bill, rent payments, and even social media history. Using these methods, lenders use data analysis to identify reliable borrowers. We are living in a digital age, in this digital age, we leave foot prints everywhere. There are many data bases in which creditors can access to get a better picture of who they are lending to. If you wish to know what methods your lender is using to determine your credit worthiness, visiting their website or contacting customer service to speak with a loan officer is your best bet.

According to Douglas Merrill, Founder and CEO of Zest Finance, all data “has the potential to be credit data”. Douglas Merrill invented software that many online lenders use today to determine potential credit worthiness. Industry experts claim these new options into looking into a borrowers credit worthiness generate a more accurate assessment of a borrowers credit worthiness as well as the ability and intent to repay a loan. While these methods invariably eliminate many borrowers from the pool of borrowers, it does however lead to lower rates, up to 50% lower than traditional loans. These new methods are now changing how a person qualifies for mainstream credit sources, and indeed helping people build credit up, as many people are now approved for loans where using solely credit bureau reports they may have been denied a loan.

It is important to note that your credit score can vary between each credit bureau agency, and if you are applying for a loan, you should first check your credit score among all 3 credit bureau report agencies. This is important to do, as you can contest inaccurate information with any of these credit bureau report agencies. If you do find inaccurate information and contest the inaccurate information, the reporting agency has 30 days to verify the information contained in their credit report on you or strike it from the report.