Loan repayment histories, credit card balances and outstanding obligations have traditionally shaped most underwriting decisions. That approach is beginning to widen as lenders search for stronger evidence of how consumers manage money between borrowing events.
New research from the Federal Reserve Bank of Kansas City, released Wednesday (July 1), illustrates why. Its analysis found that adding rent payment information could affect the credit scores of roughly 60% of U.S. renters. About 43% could experience meaningful improvements, while another 17% would see smaller changes or, in some cases, declines. The findings suggest that millions of consumers who regularly meet one of their largest monthly obligations have financial behavior that traditional credit files only partially capture.
Rent is only one example. Banks, credit unions and FinTechs are evaluating recurring financial activity that reflects day-to-day money management rather than periodic borrowing. Payroll deposits, subscription payments, utility bills, transaction account activity and cash flow patterns are becoming additional signals that help explain whether an applicant consistently meets financial obligations.
The shift reflects a practical reality in an environment where, as PYMNTS Intelligence has found, tens of millions of U.S. consumers are credit avoidant (meaning they decide not to apply at all), as the traditional scoring models have effectively left 80 million consumers without steady access to credit.
Consumers today often demonstrate financial discipline without using large amounts of revolving credit. Someone who pays rent on time every month, receives steady payroll deposits and maintains positive account balances may present a different risk profile than a conventional credit score alone suggests. In recent months, for example, Chase and digital lenders including PayPal have announced integrations with cash-flow data partners including Nova Credit to harness and analyze alternative credit data.
Cash Flow and the Underwriting Conversation
The movement toward broader data arrives as Congress examines whether the nation’s credit reporting system should incorporate additional sources of information while preserving consumer protections. During an April House Financial Services Committee hearing covered by PYMNTS, witnesses described both the promise and the complications of expanding alternative data in credit decisions.
Industry representatives argued that responsibly incorporating information such as utility payments, telecommunications records and cash flow data could help lenders evaluate consumers with limited traditional credit histories. They also contended that broader participation by data furnishers would create a more complete picture of borrower behavior.
The hearing also highlighted substantial concerns.
Consumer advocates warned that expanding data sources without adequate safeguards could expose financially stressed households to additional negative reporting, while disputed or inaccurate information could become harder to correct.
Not every payment carries the same predictive value. Income arriving through recurring payroll deposits provides evidence of earnings stability. Rent payments demonstrate performance on what is often a household’s largest monthly obligation. Bank account cash flow can reveal whether consumers regularly maintain sufficient balances, avoid overdrafts and manage income and expenses over time. Utility payments may further illustrate consistency, particularly for consumers with limited borrowing histories.
Subscription payments present a more nuanced signal. While they can indicate account stability and payment continuity, they generally carry less weight than obligations directly tied to housing, income or essential household expenses. The challenge for lenders is determining which data reflects genuine repayment capacity rather than simple spending preferences.
Used carefully, broader payment data can produce tangible advantages. Consumers with thin credit files may qualify for products previously beyond reach. Young adults, recent immigrants and households that rely primarily on debit cards rather than credit cards could demonstrate creditworthiness through payment behavior that has historically been overlooked. Lenders, meanwhile, may gain a more current understanding of applicants whose financial circumstances have changed since their last borrowing activity.
Alternative data cannot compensate for inaccurate reporting, weak dispute resolution or poorly governed data collection. Credit assessment is gradually moving away from viewing borrowing history as the only reliable measure of creditworthiness. Lenders are asking a different question: not simply whether consumers have borrowed before, but whether the pattern of their recurring financial obligations demonstrates that they can borrow, successfully, next time.
