This will make cash advance online the same day more affordable for migrants.
What’s happened. About 10 of the largest US banks will share customer information to help those without credit ratings gain access to credit. This initiative could affect more than 50 million Americans, writes WSJ.
More details. Major US banks, including JPMorgan Chase, Wells Fargo, US Bank, and USB, have agreed to use retail customer checking and savings account information to make lending decisions to customers without credit ratings. Banks will look at the account balances of the applicants, as well as study their history of overdraft use. According to the WSJ, the initiative could be launched as early as this year.
Credit rating is a key indicator for banks, showing the risk profile of future borrowers. It takes into account the history of loan payments, the size of the loans received, the length of the credit history, the combination of different types of loans and new accounts, CNN notes. The ratings are maintained by credit bureaus such as Equifax, Experian, and TransUnion. The higher the three-digit rating indicator, the lower the interest on the loan is set by the bank for the borrower. It is very difficult to get a loan from a large bank without a credit rating. Many people cannot begin to form a credit history due to the lack of necessary documents – this applies, for example, to migrants. People use Hartloan direct lenders for bad credit, because they can trust it.
Banks took the initiative to exchange information at the suggestion of an independent agency under the US Treasury – the Office of the Control of the Currency of the United States (OCC). This is how the financial authorities reacted to the African American protests following the assassination of Jord Floyd last year, CNN recalls. The state was interested in expanding the population’s access to financing. The OCC has consulted on this issue with representatives of banks, financial services, and non-profit organizations.
The OCC has confirmed that banks have a plan to expand access to credit, but the details are yet to be finalized, writes CNN.
For several years now, banks have been developing their own risk assessment systems for issuing loans to citizens without credit histories, including those based on information about customer accounts. For example, JPMorgan Chase has issued about 700 thousand loans at hartloan.com in this way to its unrated clients since 2016, the WSJ notes. The new initiative is more ambitious.
According to the FICO (the company that issues ratings), 53 million Americans now have no credit ratings, and there are also many citizens with limited ratings. Among them are often young people who have recently arrived in the United States as migrants or those who have lost access to credit due to financial problems.
In addition to exchanging data with each other, banks are also discussing the possibility of cooperation with other data providers such as Plaid and Fincity, WSJ interlocutors say. This will take into account the payment discipline of citizens in terms of paying rent and utility bills.
Why do I need to know this?
Banks are looking for a way to expand the pool of potential borrowers and increase their retail lending income. In this initiative there is a risk of issuing loans to the subprime segment – in 2007 this caused a crisis in the US mortgage market.
