Alternative Data Risk Score for Underwriting Models

This document is a technical report that outlines the testing of OneScore for Alternative Finance, a multi-data credit score developed by Equifax, aimed at improving the underwriting process for a fintech lender. The lender, which focuses on subprime consumers, sought to evaluate whether incorporating alternative data could enhance its ability to approve more loan applications and manage default risk effectively. The report details the challenge faced by the lender in relying on traditional data and the potential benefits of utilizing alternative data. The solution involved testing OneScore, which aggregates various alternative data sources, including payment histories from telco, pay TV, and utilities, as well as alternative finance data from DataX and Teletrack. The results indicated that OneScore could increase approval rates by over 30% and significantly improve predictions of delinquencies, thus allowing lenders to make more informed decisions regarding creditworthiness without increasing risk.