In the past, credit card access has been largely limited to individuals with solid credit histories and high credit scores. Recently, however, companies have tried to improve access by expanding eligibility to those individuals who lack a credit history. Specifically, large lenders in the United States, including U.S. Bank and JPMorgan Chase, are leading the charge and are doing so through a government-supported pilot program. If you have a limited credit history and are struggling to get a credit card, or know of anyone who would benefit from this initiative, then read on to learn more about how large lenders are expanding credit card access.

WHAT IS THIS PILOT PROGRAM?

This initiative comes from a government-sponsored pilot program, which is part of the Roundtable for Economic Access and Change (Project REACh). Project REACh aims to partner banks, civil rights organizations, and other stakeholders in an effort to mitigate barriers to fair and equal participation in the economy.  This partnership began in July 2020 with an announcement from the Officer of the Comptroller of the Currency. The idea of this initiative is that there are indicators of credit other than just the traditional FICO scores that have historically been used to evaluate credit card applicants and limit credit card access. Information about deposit accounts or demonstrated ability to pay bills (e.g. rent, utilities) can theoretically be use for expanding eligibility, as they are highly useful indicators of an individual’s creditworthiness.

HOW WILL THIS PROGRAM WORK?

The Project REACh pilot program will allow banks to share customers’ deposit and cash flow information with Equifax, Experian, and TransUnion, which are the three major credit bureaus that provide credit reports. This will therefore better inform the credit scores of those with limited credit histories but who have other demonstrable ways to prove their creditworthiness. At present, some banks already examine customers’ deposit and cash flow information to assess eligibility for customers without a credit history. But this information can now be shared with the credit bureaus themselves. There are still several details to be worked out, including timing, the number of banks that will start to share customer deposit information with the credit bureaus, and more. Nonetheless, these are key steps toward expanding eligibility and credit card access to those who would otherwise but shut out of a critical part of the economy.

ARE THERE OTHER WAYS TO ACCESS CREDIT?

Yes. While we have mainly been focusing on traditional credit cards, it is important to highlight nontraditional underwriting options that still allow customers to access credit. The first way to access credit is through secured credit cards, which large and small banks use as a sort of “trial run” for individuals to demonstrate their creditworthiness and eventually access traditional credit cards. Secured cards require upfront deposits from customers, and this balance ends up becoming the card’s credit limit. The second way to access credit is through alternative credit cards. These offer access to individuals with limited credit, poor credit, or no credit history at all, and these are being spearheaded by multiple financial startups. While these nontraditional underwriting options lack the perks often associated with traditional credit cards, they still provide a pathway to access credit.