These people represent 0.3 percent of the U.S. labor force and are a largely untapped customer base for U.S. businesses. Why? They do not have traditional credit history established in the U.S. and so businesses are not comfortable taking on the risk of their business. When I moved from Australia four years ago on a work visa, I could not even get a cell phone contract.
I approached multiple phone providers and they all told me the same thing. That I did not have enough of a credit history to merit a long term phone contract with their company. This is because most companies – not just phone providers – use traditional databases and resources like the FICO score to determine the creditworthiness of an individual.
FICO scores are a purely U.S. based metric and so, while I own property in Australia and hold a job in the U.S., I was requisitioned to a month to month plan on a lesser phone carrier. This month to month plan has allowed me to build my “financial reputation” and one day I hope to graduate to a regular cell phone plan within the U.S.
My new credit reputation will then also give banks the confidence to one day give me a business, home or auto loan. But it will have taken them over two and a half years to do so. In the meantime, my phone carrier and other traditional lenders have lost out on millions of dollars on potential long term contracts with me and thousands of other “under banked” foreign nationals.
As financial tides turn around the globe and the makeup of the U.S. workforce continues to diversify, many alternative and P2P lenders are realizing that relying on the limited data of a FICO score to provide a credible risk assessment of a potential customer is no longer viable. Casting a wider net to incorporate data from international bureaus and an individual’s social media profile can provide a better risk profile for customers who come from overseas, so that both customers and businesses can benefit in a more positive way.
