Overview

Many people have “thin” credit files because they don’t use credit products that report to the big credit bureaus. Lenders and newer scoring models now supplement traditional credit data with alternative sources to form a fuller picture of an applicant’s finances and likelihood to repay. This can open doors to credit for new graduates, recent immigrants, renters and cash-based consumers.

Types of alternative data lenders commonly use

  • Rental payments: On-time rent history demonstrates recurring payment behavior. Some services report rent directly to one or more bureaus. See our guide on rent and utility reporting.
  • Utility and phone bills: Consistent payments to utilities or a mobile carrier can be treated as positive payment history.
  • Bank-account and transaction data: Regular deposits, payroll inflows, recurring bill payments and low overdraft frequency provide cash‑flow signals useful for underwriting.
  • Payroll and employment records: Stable income history reduces default risk in manual reviews or automated models.
  • Behavioral and device signals: Frequency of logins, identity verification steps and other behavioral indicators can supplement risk assessments (see our piece on behavioral signals lenders use).

How lenders and models use alternative data

  • Automated alternative scoring: Some models incorporate non‑traditional fields to create a score or input into a risk model when FICO/Vantage-style scores are weak or absent. Research by the Federal Reserve and other institutions has documented promising accuracy gains in certain populations (Federal Reserve, 2021).
  • Manual underwriting: Loan officers or underwriters may accept documented rent and bank statements to approve an applicant who has no conventional score.
  • Consumer-permission products: Services such as rent-reporting platforms and tools like Experian Boost (consumer opt-in) let individuals add specific payment history to their credit file, potentially influencing scores.

Practical steps consumers can take

  1. Report rent and utilities: Use a reputable rent-reporting service or ask your landlord if they report payments. Our rent-reporting guide explains how this can affect scores.
  2. Consider consumer-permission tools: Products that connect to your bank and share transaction patterns or utility payments can help create a record lenders may accept.
  3. Build at least one tradeline: Secured credit cards or credit-builder loans remain effective ways to establish a traditional tradeline alongside alternative data.
  4. Keep documentation: Save receipts, bank statements and proof of on-time payments so you can supply evidence during manual underwriting.
  5. Review reports regularly: Check credit reports and data-sharing permissions; dispute errors promptly with bureaus and service providers.

Limitations and risks

  • Not universally accepted: Many mainstream lenders still rely primarily on bureau scores. Alternative data may matter more with fintech lenders or small banks.
  • Data quality and errors: Alternative sources can contain mistakes; inaccurate bank or utility reporting can hurt more than help if not corrected.
  • Privacy and consent: Sharing bank or device data requires careful review of permissions and vendor practices. Read terms before you opt in.
  • Potential for uneven outcomes: Some alternative inputs may inadvertently disadvantage certain groups; regulators and researchers (CFPB, NBER) continue to study fairness and unintended effects.

Regulatory context and evidence

Federal and consumer agencies have encouraged research and controlled adoption of alternative data to expand access while guarding consumer protections. The Consumer Financial Protection Bureau (CFPB) has published guidance and commentary on opportunities and risks of alternative data, and academic work (NBER, Federal Reserve research) finds measured benefits when models are properly validated.

Final takeaway

Alternative data does not magically replace a credit score, but when used carefully it can provide reliable signals of payment behavior for people with thin credit files. Combining rent and utility reporting, consumer-permission bank data, and a plan to add at least one traditional tradeline offers the most practical path to establishing creditworthiness.

Professional disclaimer

This content is educational and does not replace personalized financial or legal advice. In my practice helping clients rebuild and establish credit, I’ve found that documenting consistent payment behavior and choosing reputable reporting tools are the most effective first steps. Consult a certified financial planner or housing counselor for decisions about specific products.

Authoritative sources

  • Consumer Financial Protection Bureau (CFPB): research and guidance on alternative data and fair lending considerations.
  • Federal Reserve research on alternative data in consumer finance (2021).
  • National Bureau of Economic Research (NBER): studies on alternative data and credit scoring (2019).