It’s different but improved this time? From the latimes.com:
Alternative types of credit scoring have been around for years, taking into account factors not always captured by traditional scores, such as whether borrowers pay their cellphone bills promptly. They’ve been used to assess the creditworthiness of consumers with little or no traditional credit history, including those in developing countries.
Now, a new generation of start-ups has developed scoring models that look at such things as what a borrower studied in college and how a restaurant rates on Yelp — and they’re using them on a wider audience, from businesses to individual borrowers with middling or even good credit.
The abundance of digital information, and the rapidly growing storage and computing power able to comb through it all, is changing industries including agriculture and healthcare. It should come as no surprise, then, that it’s shaking up consumer finance.
Proponents say these new methods should help borrowers gain credit, just as it has helped farmers increase their yields.
“In banking, it’s inconceivable that in the future we’ll be making financial decisions in the way we do today. We’re making decisions about people based on less than 5% of the information about them,” said Asim Khwaja, a professor of international finance and development at the Harvard Kennedy School who has studied alternative credit scoring in the developing world. “There’s a lot of excitement in this field.”
But there’s also plenty of skepticism.
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