Credit Without a Credit Score? Big Banks Target New Borrowers.
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What is the main topic discussed in this episode?
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What is Project Reach and which banks are participating?
Here's your Money Briefing for Friday, May 14th. I'm Charlie Turner for The Wall Street Journal, filling in for J.R. Whalen. Several major banks are taking part in a new program that would extend credit to consumers with no credit score.
This new initiative would use people's deposit account activity. So that's things like, what's the balance in your checking account over time? How many times have you overdrawn your checking account? And those are kind of going to be the new proxies for creditworthiness.
Coming up, our banking reporter Peter Rudiger will tell us about the program, what it could mean for millions of consumers, and the hurdles it might face. That's after the break.
This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data.
Who are the 50 million Americans without a credit score and why are they excluded?
They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.
Several major banks are launching a new initiative to issue credit cards to consumers who don't have a credit score. The move, by JPMorgan Chase, Wells Fargo, and others, is part of a government-backed initiative called Project Reach. It's aimed at extending credit to people who've traditionally lacked opportunities to borrow. Here to help us understand how this program will work is our banking reporter, Peter Rudiger. Peter, thanks for joining us.
How would deposit account activity be used as a proxy for creditworthiness?
Happy to be here.
So, Peter, a person's credit score is traditionally the first thing banks look at before deciding whether to approve a loan or issue a credit card to someone. And this new program is different. You've spoken with people familiar with the plan. Based on your reporting, how would it actually work and who would benefit?
So there are about 50 million adults in the US who do not have a traditional credit score today. Maybe those are recent immigrants who just don't have a borrowing history because they just got to the country. Maybe they're people who have done most of their finances with cash or debit cards, so they have no history of borrowing. And that's a population that is largely shut out of things like homeownership or, you know, even getting an auto loan if you can't demonstrate good borrowing behavior. So this new proposal is aimed at those people. Instead of looking at a credit score or credit history, which measures things like how many credit cards do you have outstanding, what's your balances on them, have you paid them on time, this new initiative would use people's deposit account activity.
So that's things like what's the balance in your checking account over time. How many times have you overdrawn your checking account? And those are kind of gonna be the new proxies for credit worthiness as opposed to the traditional credit score.
And the banks are working together on this?
Right, so banks have done a little bit of this for their own customers in the past. So JP Morgan, if you had applied for a Chase credit card before and you had a checking account at Chase, JP Morgan might be able to say, okay, we've run the numbers based on their checking account activity and we think this person is a good credit risk. That hasn't been possible to do it if, let's say, that's a Wells Fargo deposit customer applying for a Chase credit card.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:36
2
What is Project Reach and which banks are participating?
0:36–1:19
3
Who are the 50 million Americans without a credit score and why are they excluded?
1:19–2:16
4
How would deposit account activity be used as a proxy for creditworthiness?
2:16–3:55
5
How will banks share checking and savings data across institutions?
3:55–4:52
6
Why are big banks motivated to extend credit to people without credit histories?
4:52–6:23
7
How does Project Reach differ from prior alternative-scoring efforts?
6:23–8:19
8
What are the next steps, privacy concerns, and risks for consumers and banks?
8:19–8:52
Speakers
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