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Some large banks in the U.S. — including JPMorgan Chase and U.S. Bank — are participating in a government-supported pilot program to help expand access to credit cards for consumers who lack a credit history.
Participating lenders can share bank deposit information with the credit bureaus, making it easier for issuers to be able to consider customers' deposit data (and, therefore, cash flow) when weighing applications. Some details are unclear, including the timing.
This is a departure from typical credit card underwriting, which largely relies on the traditional FICO scoring model to evaluate applicants. That scoring model doesn't take into account factors like cash flow, or bill payments for rent and utilities.
Such alternative underwriting models already exist among multiple startups in the credit card space, but not at the scale of a lender like Chase.
“This is about opportunity,” says Trish Wexler, spokesperson for JPMorgan Chase. “This will give millions of Americans the opportunity to access credit that’s essential to building wealth — buying a home, starting a business or financing education.” According to data from Chase, 50 million Americans lack a credit score, which can make it difficult to qualify for credit cards and more expensive to take out loans.
How it could work
The program is part of Project REACh (Roundtable for Economic Access and Change), a partnership announced in July 2020 by the Office of the Comptroller of the Currency. Partners include banks, civil rights organizations and other groups, with an aim to reduce the roadblocks that prevent equal and fair participation in the economy.
Some banks, including Chase, can already look at bank deposits and cash flow to help assess credit eligibility for consumers without a credit history. Project REACh enables banks to share this data with the three major credit bureaus — Experian, Equifax and TransUnion — which compile the credit reports that inform your credit scores.
For now, Chase is sharing only deposit account information, but plans to eventually share other payment information, like rent and utility bills, with credit bureaus.
It's unclear how many banks will begin to share deposit information with credit bureaus as part of this initiative, or when this will begin. But a representative at the Office of the Comptroller of the Currency says participating banks are each spearheading their specific efforts while collaborating with one another.
Other ways to access credit: Alternative and secured credit cards
Alternative credit cards launched by multiple financial startups in recent years already use nontraditional underwriting to provide credit card access to consumers with no, limited or poor credit. Some cards are geared toward immigrants who don’t have a Social Security number, or who lack a U.S. credit history but have substantial assets.
Secured cards, which require an upfront deposit that becomes your credit limit, have long been an option as well. These cards are issued by banks big and small and often provide a path to “graduate” to traditional unsecured credit cards after months of responsible use.
While alternative and secured cards lack many of the perks of premium credit cards, some do offer incentives, such as higher credit limits or rewards rates after a certain number of on-time payments.
Major banks participating in nontraditional underwriting can provide more credit card options at a larger scale.