On both sides of the financial services market - consumer and merchant (or borrower and lender) - trends change constantly. Much of this stems from technology's rapid developmental pace: For example, a decade ago, we likely wouldn't have anticipated how successful mobile payment apps are these days. That tech-driven shift is just one of dozens the world has seen. There have never before been more ways to make payments, and more types of loans to take out, than there are now.
"Assessing single-payment credit data can be beneficial to many different consumers."
Not all methods of credit reporting have caught up to this breadth of selection, however. Single-payment credit data - records of loans repaid in a lump sum with a repayment deadline usually measured in months, not years - is one payment method that's notably ignored in traditional credit but factored into alternative credit reports.
A favorite of the underbanked
In its 2017 study of American consumers that could be considered financially underserved, the Center for Financial Services Innovation took note of which financial products these individuals favored the most. Single-payment credit was one of 2016's most popular product categories among underbanked, unbanked and credit-invisible Americans in terms of spending, accounting for $39.4 billion. Only short-term credit - loans with one- or two-year terms - brought in more spending ($57.9 billion).
It's clear that single-payment and short-term credit have become common among U.S. consumers who work hard but don't rely heavily on the use of bank products or credit cards. By virtue of sheer numbers, it makes sense for this data to count toward a credit score.
Evidence of fiscal responsibility
The financially underserved constitute too large a share of the American populace - well over 30 million as of the FDIC's last survey of underbanked and unbanked households - to be written off. Because these individuals use such a limited share of the credit and banking services market, it stands to reason that the products they do use should be monitored, and factored into any evaluations of their creditworthiness.
PRBC's credit decisioning platform takes the time to assess single-payment and short-term credit products, along with many other common payments, like utility bills and monthly rent. This helps develop a clearer snapshot of individual finances than what traditional credit scores can provide. It offers the flexibility people and businesses need in an ever-evolving economy complemented by constant tech innovation. Contact us today to learn more.