Expanding Credit Accessibility to the Freelance and Self-Employed Workforce

Since the start of the pandemic, many factors, including record employment, layoffs, and the desire for better flexibility, have influenced the rise in the freelance and self-employed workforce. In 2020, 59 million people shifted to freelance work in the United States and represented 35 percent of the workforce. While being your own boss has its pros, the lack of access to consistent paystubs can be a huge roadblock for freelance and self-employed borrowers. Non-traditional data can be instrumental in bridging that gap and expanding credit accessibility.

In 2020, 59 million people shifted to freelance work in the United States and represented 35% of the workforce.

Limited lending options

A common challenge the nontraditional workforce faces is limited access to lending options for mortgages, education, and businesses. High-income requirements and banks’ preference for reliable and fixed incomes often shut them out. Banks and lenders typically rely on traditional data like credit history, debt-to-income ratio, and credit scores to assess prospective borrowers – leaving freelancers and self-employed workers in a bind.

A common challenge the nontraditional workforce faces is limited access to lending options for mortgages, education, and businesses.

Reduce lender concerns 

Whether applying for business or mortgage loans, lenders see the income of nontraditional borrowers differently. Lenders want to validate ongoing sources of income to protect themselves from potential defaults.  Going the extra mile to ensure that freelance and self-employed workers still have financial stability has progressed beyond a nice-to-have, it’s steadily become a necessity.

As the industry of freelancers and independent contractors grows, so does the need for accessible loans. Alternative data sources are a helpful indication of a borrower’s ability to repay loans. Incorporating cashflow data, utility, rent, and telco payments into credit risk decisioning can offer lenders increased visibility into the nontraditional workforce.  

 

Learn how to Build a Risk Model with Utility Payment Data

 

Fill in the credit accessibility gap with alternative data

Accessing nontraditional credit data will expand the market for lenders and consumers. As more consumers push towards their passions and dive into self-employment and freelancing, lenders will have to modernize their approach to lending. By incorporating Urjanet’s alternative data solution into your risk-decisioning process, you’re not only tapping into a fruitful market of potential borrowers but also supporting those that keep the economy going.

Ready to get started? Speak with one of our experts today to get direct and automated access to alternative data and improve credit accessibility.

You Might Also Be Interested: 

• How Incorporating Non-Traditional Data Into Credit Risk Decisioning Can Drive Growth
• Innovative Applications of Alternative Data Across the Financial Services Customer Lifecycle
• The Economic Impacts of Alternative Data on Financial Inclusion

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