No Credit Score? These Banks Might Help You Get Plastic

Young woman with a credit card
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A handful of the nation’s largest banks plan to share data on their customers’ deposit accounts in hopes of helping those without credit scores land a new credit card account, the Wall Street Journal reports.

The effort — which includes about 10 banks, including major companies such as JPMorgan Chase, Wells Fargo and U.S. Bancorp — will “factor in information from applicants’ checking or savings accounts at other financial institutions to increase their chances of being approved for credit cards,” the newspaper reports.

In other words, the pilot program will allow banks access to account information from participating institutions for purposes of making credit decisions.

The federal government is backing the initiative, which is aimed at people who do not have credit scores but who have a history of being financially responsible. The program is slated to kick off sometime this year, with the goal of offering more borrowing opportunities to people traditionally excluded from such access.

The WSJ says 53 million U.S. adults do not have traditional credit scores, citing data from Fair Isaac Corp., the creator of the FICO credit score. Many people who pay only with cash or use debit cards do not have credit scores.

The new effort marks a significant step away from the use of credit scores in determining whether a borrower is worthy of getting credit. According to the WSJ:

“The effort, if successful, would mark a significant change in the underwriting tactics of big banks, which for decades have enshrined credit scores and credit reports as the main tools to determine who gets a loan. They generally reflect a person’s borrowing history in the U.S., including whether they pay their loans on time.”

In recent years, banks such as JPMorgan and Bank of America have developed in-house risk models based on bank account activity with the goal of approving financing for their own customers who have limited or no credit histories, the WSJ reports.

JPMorgan is likely to be the first lender to use the new deposit-account data when evaluating those applying for credit cards, the WSJ reports. Those efforts could begin as soon as this fall.

Marianne Lake, chief executive of consumer lending at JPMorgan, told the WSJ:

“It’s not a Hail Mary. It’s something that we know works.”

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