How An Alternative Credit Score System Could Help You

posted by Chris Valentine

When it comes to getting a loan or a line of credit there are so many people who are hurt by the default credit scoring system. For many years it seemed that this was something which couldn’t be changed or contested, but now it can. An alternative credit score system is now in place for many companies and they are able to use it to support those who have been restricted by the more traditional credit score system. If you have been rejected for a loan or credit line application then here is exactly why an alternative credit scoring system could be just what you need. 

How It Works

Previously the credit scoring system was very basic and only featured a couple of fundamentals on which it would calculate how risky you were to lend to. Unfortunately the old system was based purely on how much you make, how much credit you currently have and how much credit you have managed in the past. Occasionally geographical location was also taken into account. The alternative credit scoring system takes a lot more real life factors into account and that is why it has proven to be revolutionary. 

Never Borrowed

One of the biggest issues with the old system was that it punished those people who had never even had credit before. It is understandable that there would be some suspicion as to how an, let’s say 18 year old, could borrow money because there was no precedent set as to how they would be able to repay, or indeed if they could. The smart approach to this is not to reject all youngsters or adults who have never taken on debt before, because this simply suggests that nobody will pay it back. The alternative system takes these people into account and simply limits how much they can borrow, so that they can actually get started with their own line of credit to build up trust. 

Changing Their Ways

It is true that traditionally younger people who don’t have a full understanding of money management will run into problems with their debt, but that doesn’t mean they should be punished for life. The old system very much did this and there are many in their mid to late 30s who cannot get a mortgage in their name because of the fact that they had previously had issues with debt. Eventually people have to be given a second chance, especially if they were very young at the time. What the alternative system is able to do is weigh up these metrics and look to encourage people to once again take on small levels of debt, with sensible interest rates, so that  they can get back into the system and back borrowing once again. 

There were so many flaws in the old system and businesses are beginning to recognize this. It is for this reason that the alternative credit scoring system makes so much sense and why more and more businesses are beginning to use it when they lend.

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