Experian, Equifax, and TransUnion gather “alternative” credit data like rental payments to expand credit to more people, but it may hurt those same people, too
Steven Melendez / Fast Company : Tweets: @pasternack Tweets: Alex P. / @pasternack : 2 years after the Equifax breach, the giant credit bureaus are increasingly mining whole new mountains of your *alternative* data that could help raise your score. it could also hurt your score, and your privacy http://www.fastcompany.com/... http://twitter.com/...
Context & Ripple Effects
The three national bureaus have spent years widening what counts as credit data, and this piece lands a week after Equifax and FICO launched Data Decision Cloud, which packages the data behind consumer scores for financial firms and marketers — commercializing exactly the expansion the article describes. The privacy stakes aren't hypothetical in this coverage: Equifax's own [[a:922573|strategy of gathering as much personal data as possible amplified the fallout of its 2017 breach]].
The regulatory counterweight is already visible in Europe, where the [[a:970097|EU's data protection supervisor recommended against using search queries and browsing history for credit assessment]] — a line drawn around the same 'alternative data' frontier the bureaus are pushing.
First-order effects
- Consumers with thin credit files gain a path to scored credit through rental-payment reporting by Experian, Equifax, and TransUnion — but the same expanded datasets can also drag scores down and widen each person's exposed data footprint.
- Lenders and marketers get richer scoring inputs to underwrite previously unscoreable borrowers, immediately monetizable through offerings like Data Decision Cloud.
Second-order effects
- Privacy regulators face pressure to define which data categories legitimately belong in credit decisions, following the EU supervisor's stance against behavioral data in scoring.
- Bureaus' data-accumulation posture raises their own liability profile: the broader the dataset, the larger the blast radius of any future breach or error like the faulty-score incident Equifax later attributed to a coding issue.
Third-order effects
- If the pattern holds, creditworthiness shifts from a record of borrowed-money behavior to an inference problem over whole-life data, forcing a structural choice between financial inclusion and data minimization that regulators — not the bureaus — will ultimately arbitrate.
The trend: Credit scoring is expanding from repayment histories toward broad alternative-data inference, with privacy regulators beginning to mark the outer boundary of what may be scored.