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Later this
year, JPMorgan Chase, US Bancorp, and Wells Fargo will join several
other banks in a pilot program offering credit cards to people without
credit scores, the WSJ reported.
How's that gonna work?
Under the
government-backed initiative, the companies will share information with
each other about credit card applicants' bank accounts. They'll examine
balances and overdraft histories to identify financially responsible
individuals who weren't able to build credit before.
- Eventually, the banks may make other financial products, like auto loans or mortgages, available to approved customers as well.
While banks and credit reporting firms have tried
setting up alternative risk models before, they haven't found an
industry-wide solution. Last summer's protests around racial injustice
provided an extra push, and last year, banking, fintech, and nonprofit
leaders met with the Treasury Department to find ways to get more credit
into historically disadvantaged communities.
Big picture: For decades, a credit score was the golden ticket to a credit card. While there's no shortage of finance startups hawking
credit-building apps to consumers as young as 13, a massive banking gap
persists among adults: The creators of the FICO score estimate that 53
million US adults lack traditional credit scores.
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