Alternative Credit Scoring: Boost Acceptance Rates and Lower Credit Losses

Expand credit access and tap new markets with alternative data for credit scoring.

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Leverage the Power of Alternative Data for Credit Scoring

In the Philippines, the traditional credit scoring process requires a borrower’s socio-demographic profile and financial history. This includes their age, employment status, gender, marital status, and educational attainment — among others. But what about the underbanked and people who do not have financial records or bank accounts to prove their creditworthiness?

In 2022, the Philippine Statistics Authority and the Land Bank of the Philippines opened their doors to 8.4 million Filipinos without bank accounts. While this made it possible for 5.8 million people to open transaction accounts, the country still has a sizable unbanked population.

So what about the underbanked and people who do not have financial records or bank accounts to prove their creditworthiness? Enter the power of alternative credit scoring.

Alternative credit scoring holds great potential in expanding access to credit, even for the unbanked. Alternative credit data, such as telco data, enables banks to get a more comprehensive snapshot of a borrower’s credit behavior and potential risk, even if they do not have credit history. This is extremely crucial in a lending environment where a growing number of customers are credit invisible, and the competition for new customers is fierce. Alternative credit data also provides lenders with a current and comprehensive visibility into consumer risk, allowing them to deliver smart and optimized products and services.

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unleash the power of alternative data with credit scoring systems

What is Alternative Credit Scoring?

Alternative credit scoring refers to the use of data from digital application and platforms on client behavior. It provides borrowers, especially those with no credit history, an opportunity to get a loan by calculating their score and risk potential based on various factors such as:

  • Telco data (call duration, call destinations, call origin location, duration of SIM ownership, porting history, handsets used, number of missed calls, and other types of data)
  • Shopping history
  • Rent, utilities, and bills payments
  • Behavior on social media

Lenders can use the alternative data above to assess the overall creditworthiness of an applicant. With alternative credit scoring, lenders can expand credit to a new targeted audience, helping the underbanked gain access to credit. Alternative credit scoring helps those who were once unable to enter the credit system, providing them access and giving them easy loans to start establishing their credit scores.

Benefits of Alternative Credit Scoring

Improved assessment of creditworthiness

Many lenders reject loan applications from individuals with a low credit score. With alternative data credit scoring, they get a better and more comprehensive view of the applicant's creditworthiness. By analyzing other data such as frequency of phone “load” top-ups and monthly bills payment patterns, lenders can determine which applicants are less likely to have problems in repayments. The rich suite of information provided by alternative credit scoring helps in making informed decisions without compromising on their company's risk exposure.

Enhanced customer experience

By using alternative data for credit scoring, lenders can reduce loan origination costs which they can pass on to borrowers in the form of lower interest rates. In the same vein, borrowers who have previously been sanctioned loans with unfavorable interest rates (due to lack of adequate credit history) can be reassessed using their digital footprint. Alternative credit data provides an innovative medium for lenders to correctly assess the risk levels in lending and offer the right tools to the underwriters and analysts to deliver loan products that a win-win for both parties — the lenders and the borrowers.

Increased market reach

Customer profiles such as students and young professionals often find it difficult to obtain loans due to gaps or issues in their credit scores. Financial inclusion in the Philippines can be achieved through alternative credit scoring, which creates a niche for lenders who are willing to extend their products to specific target groups, particularly those who are unbanked and individuals with bank accounts but no credit history. With alternative data credit scoring, they can strengthen their loan application case. If they make timely payments of bills, charges, and other household expenditures, then they have a high chance of securing loans even with a low or non-existent credit score.

Why is Alternative Data Good for Credit Scoring?

Score your borrowers on their behavior with Telco

Boosts the underwriting process

Alternative credit data substantially enhances the traditional process of underwriting with the use of richer variables or data points. These may include variables such as promptness in paying monthly bills, banking transaction behavior, and load top-ups. For the underwriting team, alternative data credit scoring aids in mitigating credit risk and brings about a much better process of monitoring and risk modeling.

Detect fraud using objective alternative data sources

Eliminates human bias

The rapid advances made by fintech regarding alternative credit scoring has made a substantial impact on the level of financial seclusion in the Philippines. Alternative data for credit scoring uses automated digital tools prevent biases in factors such as demographics or age from creeping in due to human involvement during decision making. Algorithm models used in alternative credit scoring displays the lack of sociological bases, doing a better job at delivering impartial rejections or approvals.

Learn more about your client by using our customer profile check

Uses real-time data

In the traditional credit scoring process, bad history may impact an individual’s credit standing for as long as three years after issues have occurred. It takes some time before an applicant can recover from a dip in their credit score and reach a healthy score again. With alternative data credit scoring, lenders can use real-time data to make informed decisions. The data provides time-relevant insight and offers a comprehensive assessment to check an applicant’s current creditworthiness.

For more information and inquiries about our telco data scoring system, contact us today. 


    FinScore is a financial technology company in the Philippines that offers a powerful credit scoring platform and fraud detection tools based on alternative data, including telco-based data. 

    As the pioneer in lending and scoring of the unbanked, we continuously provide fintech services that empower financial institutions, banks, and credit bureaus with flexible platforms to help them make insightful and reliable credit decisions. Contact us today to learn more about our products and solutions for financial institutions.