What is an alternative credit rating?

 

Alternative credit ratings are credit ratings conducted by institutions other than credit rating agencies. Alternative credit ratings use more information to assess creditworthiness than traditional credit ratings. For example, alternative credit ratings can be used to assess creditworthiness using income, property, consumption patterns, and Internet activities. Alternative credit ratings have the following advantages over traditional credit ratings.

Those who lack credit information can also receive credit ratings.
Increases the accuracy of credit ratings.
The cost of credit ratings is low.
Alternative credit ratings are expected to complement traditional credit ratings. Alternative credit ratings are expected to help increase financial accessibility, increase the accuracy of credit ratings, and reduce the cost of credit ratings for those who lack credit information.

Alternative credit ratings are still in their early stages, but they are growing rapidly. As of 2020, the global alternative credit rating market is about $100 billion. The alternative credit rating market is expected to continue to grow in the future.