PERCNew PERC Paper finds Growing Research Consensus on Benefits of Alternative Data

PERC released a new report recently that highlights the growing consensus on the credit market impacts of using alternative data. PERC’s report Research Consensus Confirms Benefits of Alternative Data synthesizes findings from a diverse group of studies conducted by the private sector and other research organizations.

Among key findings are the following conclusions from studies examined:

  • Credit Invisibility (either not having a credit report or having too little information to generate a score) affects tens of millions of Americans;
  • Non-financial payment data (such as from gas, water, electric, cable TV, broadband, wireline and wireless telephone) that is fully reported (both timely and late payment data) and other alternative data are predictive of financial payment data based upon the actual experience of millions of Americans over time;
  • Financial inclusion increases overall, especially for lower income Americans and members of minority communities, when fully reported non-financial payment data and other alternative data is available to lenders; and
  • Including alternative data greatly reduces Credit Invisibility, enabling many to begin building a credit history, accessing low limit, mainstream credit, and protecting themselves against credit they cannot afford.

“Lost amidst all the hub-bub around so-called ‘Big Data’ are the following facts:

(1) Not all alternative data is equal. Some data sets are proven predictive and have been validated in credit markets around the world. These include energy utility and media payments but not things like social media data and other fringe alternative data assets;

(2) Using comprehensive data assets for eligibility determination is not new, and has been the norm in advanced economies globally for many decades. It just has a new name; and,

(3) Consumer credit markets are most often cautious and conservative when trying new things. Lenders test new data and new scores with retrospective data, then if satisfied conduct limited live tests and scale up depending on results. No one is proposing that your telephone payment history be used as the sole basis for a mortgage loan,” said Dr. Michael Turner, PERC President and CEO.

You can download the report on PERC’s website here: