Having good credit is a key part of some of life's biggest moments. People with high credit scores get lower interest rates on loans, have an easier time renting apartments and can buy better vehicles than those with poor or nonexistent credit.
Yet millions of people around the world have no credit scores, making it difficult to move forward financially. According to the Policy & Economic Research council, more than 25 million people are "credit invisible," meaning they lack the data credit bureaus need to produce credit scores.
To achieve financial stability and mobility, the credit invisible can use alternative credit reports.
What is an alternative credit report?
Unlike a "traditional" credit report, which uses credit card and loan data to generate scores, alternative credit reports use data from the bills you pay every month.
For example, an alternative credit report may use your monthly internet, utilities, cable and rent payments, among others. If you regularly pay your bills on time, you'll likely receive a high alternative credit score.
Best of all, alternative credit reports are free of charge. You simply need to give an alternative credit agency permission to link to your accounts. The agency uses your data to generate a credit score between 100 and 850.
Who needs an alternative credit report?
Individuals with no credit, insufficient credit or bad credit can benefit from alternative credit reports. According to the Consumer Financial Protection Bureau, about 19 million adult consumers have credit records that are considered unscorable. These people tend to live in lower-income neighborhoods.
Lack of a credit score isn't a problem that you can solve overnight. For many people, an alternative credit report may be the only way toward a financially stable future.
What can you achieve with an alternative credit report?
Once you have your free alternative credit report, you'll be on your way toward getting loans. For example, you may qualify for a better car loan, which would help you get a better, more fuel-efficient vehicle. With that car, you would be able to drive further to a better job.
Or, you may find it easier to rent a more expensive apartment in the city, giving you easier access to better job opportunities and school districts as well as access to safer, economically stable communities.
Financial mobility and stability means getting the forward momentum to achieve your personal and professional goals. Even if you lack a traditional credit score, an alternative score lets lenders know that you can - and do - pay your bills on time.
The sky really is the limit once you're on stable financial ground. If you're a member of the credit invisible population or you don't have enough data to generate a credit score, an alternative credit report could help you move forward.