Under The Microscope:

WASHINGTON, D.C. - New research from the Brookings Institution Urban Markets Initiative found millions of Americans could benefit from the credit industry using new and readily available information such as utility payment history to calculate credit scores.

According to the study's authors, this finding has the potential to bring millions of minorities, immigrants and underserved individuals into the economic mainstream.

The study said approximately 35 million to 54 million Americans remain outside the credit mainstream. Mainstream lenders have too little information on these people to evaluate risk.

Brookings said mainstream lenders can use "alternative" or "nontraditional" data, including payment obligations such as rent, gas, electric, insurance, and other recurring obligations, to evaluate the risk profile.

The study said use of alternative data in consumer (and commercial) credit reports can close an "information gap" that has negatively affected the lives of millions of thin-file and unscoreable Americans who reside in urban areas and elsewhere.

lternative data, if widely incorporated into credit reporting, can bridge the information gap on financial risk for millions of Americans, the authors concluded. More concretely, they said, considering that many of these millions outside the credit mainstream are poorer, less advantaged Americans, the information can direct markets toward a faster alleviation of poverty in this country. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com