Financial technology—or “fintech”—can help connect lenders and borrowers online. Some fintech lenders told us that they use alternative data to help determine borrowers’ creditworthiness. For example, lenders may supplement traditional data (such as credit scores) with information about a borrower’s college degree.
Using alternative data could make loans available to more people, but could also have unintended effects. Fintech lenders may not know how to use the data and still comply with fair lending laws.
Source: FINANCIAL TECHNOLOGY: Agencies Should Provide Clarification on Lenders’ Use of Alternative Data