For lenders such as credit unions, the 53 million Americans who do not have a traditional credit score represent an untapped – but somewhat spooky – market.

The risks associated with lending to people who don’t fit the model of a traditional borrower can often scare lenders away. And a recent survey of lenders showed credit unions have been slower than other financial institutions to find alternative ways to assess the risks of extending credit to such borrowers.

noninterest income alternatives“It was very difficult to assess their credit worthiness,” said Luis Peralta, president of Nix Neighborhood Lending, a subsidiary of the Manhattan Beach, Calif.-based Kinecta Federal Credit Union, which has used non-traditional methods of evaluating credit risk. “We had to develop a new underwriting model.”

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