Banks Planning to Issue Credit Cards to People Without Credit Scores
Major U.S. banks like JPMorgan, Wells Fargo, and U.S. Bancorp are planning to start sharing data on customers’ accounts in an effort to provide credit to Americans without credit scores. This includes considering checking or savings accounts balances over time, as well as customers’ overdraft histories, to increase their chances of qualifying for a credit card in the absence of credit histories.
A piece by The Hill noted that nearly 10 banks agreed to share information with each other, and are considering using credit reporting firms like Experian, Equifax, and TransUnion for data-sharing.
The initiative is part of the Roundtable for Economic Access and Change (Project REACH), launched by the Office of the Comptroller of the Currency (OCC) in 2020. The OCC met with leaders from the financial sector to brainstorm how to increase credit to those who have historically lacked it. Studies show that Black and Hispanic adults are less likely to have credit scores than white and Asian adults.
Americans who have only used cash or debit cards, as well as individuals who are new to the U.S., do not have traditional credit scores. This represents nearly 53 million Americans, so the initiative will bring a significant change in how lending operates in the U.S.
“It’s not a Hail Mary. It’s something that we know works,” said Marianne Lake, chief executive of consumer lending at JPMorgan.
Eventually, individuals who qualify for credit cards under this initiative could also qualify for auto loans, mortgages, and other financial products that typically require a credit score.