Fintech is transforming credit scores through technology, alternative data sources, and advanced analytics. This change expands the pool of people who can access credit and loans, empowers individuals, and improves the accuracy and fairness of scoring models.
Boosting Your Credit Score
Fintech services boost credit scores by leveraging alternative data sources to make loans that lenders would otherwise decline. This expanded access to credit democratizes financial inclusion and allows small businesses or those without established credit to qualify for funding.
Many consumers use fintech tools such as current.com to pay at restaurants, send money to friends, and monitor their account balances. These tools enable fintech companies to revolutionize how we finance our daily lives and make it easier than ever for people to achieve their financial goals.
Streamlining the Credit Evaluation Process
Fintech services are transforming the world of finance. From consumer-facing apps that help consumers digitize receipts and streamline expense tracking to back-end processing and accounting solutions, fintech has carved out an essential space in the financial ecosystem.
Fintech services improve traditional banks’ offerings by streamlining credit evaluation. Often, evaluating loan applications can be a time-consuming and labor-intensive process that can delay the delivery of loans. Fintech companies streamline this process by giving lenders a more comprehensive image of a borrower’s creditworthiness.
Rather than relying solely on traditional credit reports, fintech firms may incorporate alternative data points such as utility bills, rent payments, and social media activity. This holistic approach to assessing creditworthiness allows lenders to make lending decisions faster and more accurately. It also gives more people credit, fostering financial inclusion and economic prosperity.
Leveraging Data Sources Other Than Traditional Credit Agencies
Many fintech companies use alternative data to boost credit scores for consumers who have been traditionally underserved. These include freelancers and small business owners whose work histories aren’t easily tracked by the traditional financial services ecosystem or who rely on check-cashing or payday loans for income.
For example, one fintech company uses a consumer’s deposit transaction history to make credit decisions. As the industry becomes more comfortable with open banking, we expect to see more fintechs using this data type in their lending products.
Streamlining the Loan Approval Process
Fintech tools allow lenders to collect and verify documents quickly and efficiently, expedite loan applications and approvals, and offer faster customer service. For example, a young professional looking for a personal loan can use a fintech application to provide all the required information on their smartphone and submit it digitally. This eliminates the need to visit a bank physically and may save them time and money.
Fintech also provides broader access to credit by assessing loan eligibility using data sources other than traditional credit scores and collateral requirements. This expands the pool of potential borrowers and benefits small businesses and startups without a strong financial profile or credit history.
