Fair Isaac and TransUnion are working on rolling out new credit scores, tackling the 26 million "credit invisible" individuals that do not have enough history to generate a FICO score. Although the goal is to help underserved potential borrowers gain access to capital, there is also a risk that all the additional information will worsen a persons credit profile. It will be interesting to see how these companies will collect and analyze all the various data points, ranging from banking account history to home addresses.
About 26 million Americans, or 11 percent of the adult population, lack credit files and are “credit invisible,” while another 8 percent have some history but not enough to generate a score, according to the Consumer Financial Protection Bureau. Traditional credit scores are based on information reported by banks and credit card companies to the major credit bureaus. But, in what is often a frustrating Catch-22, many consumers can’t qualify for loans, or they may have stopped using credit after suffering a financial crisis, so they don’t have a financial footprint to create a score. Lenders are reluctant to do business with such consumers, because they are unsure whether the borrowers are likely to pay back a loan.