Financial Opportunities: How Shopping Data Can Replace Credit Histories for Assessing Creditworthiness

If you were hesitant to loan a significant sum to someone unfamiliar, banks exhibit similar caution. Consequently, individuals lacking a credit history often confront challenges when seeking loans. Financial institutions and credit agencies assess past borrowing behaviors to evaluate repayment potential, and an absence of such history leads to unfavorable assumptions. This situation places numerous individuals in a difficult position, including first-time credit card applicants, cash-reliant shopkeepers, or new migrants without local records. Professors specializing in consumer finance sought alternative methods to pinpoint reliable borrowers. Their recent study in Peru indicated that everyday shopping behaviors could provide insights. By merging loyalty card data from a major retailer with national credit information, the research revealed promising results. For applicants without credit history, approval rates increased from 16% to nearly 48% by incorporating shopping patterns. Ultimately, utilizing this retail data could enhance access to credit for responsible individuals previously overlooked, paving the way for improved financial inclusion.