Would you feel comfortable disclosing your bank account information on a personal loan application? Companies that use the data say it helps them better evaluate applicants by giving them insight beyond a credit report, which usually shows things like your name, address, Social Security number, and
Would you feel comfortable disclosing your bank account information on a personal loan application? What about your work history? Your college major?
But some consumer advocates say that while certain types of alternative data can be promising for consumers, others have the potential to reinforce existing racial and economic disparities and limit access to money for low- and middle-income people.
A 2018 Bureau of Labor Statistics report shows that 41% of employed white people and 54% of Asian people work in professional or management fields, while 31% of employed blacks and 22% of Latinos work in those fields. Story continuesGirouard says that while many of the variables Upstart considers in an application decision have a clear connection to an applicant’s financials, others are considered because the algorithms the company uses have deemed them relevant to someone’s ability to repay.DON’T DISCOUNT YOUR CREDIT SCORE
“In terms of lending without replicating existing disparities, it’s hard because even the credit score itself has racial disparities,” she says.
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