Credit risk management written on notebook on desk Source: Shutterstock

As the country recovers from the physical and mental health implications of the COVID-19 pandemic, the economic consequences could affect consumer financial health and credit underwriting for years to come. The Federal Reserve recently questioned the efficacy of traditional scores over the next few years. Their general point is this: The industry could face a systemic risk if and when credit tradeline data changes in value as a direct consequence of COVID-19 programs and effects. When consumer underwriting decisions rely on tools limited to credit report tradeline history, credit decisions can become less effective and credit products less accessible or more expensive. Luckily, financial institutions can access much more information than what’s in a traditional credit score. That’s where alternative data comes in.

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