Lenders use alternative data to approve millions more borrowers
Lenders are turning to bank‑transaction data, cash‑flow records and richer credit histories to approve loans for millions of U.S. adults who lack traditional scores. Recent underwriting shows that verified bank transactions can lift approvals by up to 8% for underserved segments, Affirm’s new model adds 3.4% more completed purchases, and Plaid’s LendScore delivers a 73% approval rate versus a 65% benchmark.
Roughly 25 million U.S. adults have insufficient recent credit activity to generate a usable score, according to the CFPB. About 35% of subprime consumers hold neither a credit nor a store card, compared with 12% of prime and 4% of super‑prime borrowers. Personify Financial reports that adding verified bank‑transaction data increased approvals by up to 8% among underserved consumers while keeping credit costs steady. Affirm’s latest transformer‑based underwriting model generated 3.4% more completed purchases at comparable risk by approving applicants its earlier system had declined. Plaid’s LendScore model posted a 73% approval rate versus 65% for a traditional benchmark at equivalent risk, and at the same approval rate it observed 41% lower risk. The Federal Reserve estimates that 32 million U.S. adults are unscoreable, including 7 million with no credit history and 25 million with thin files. PYMNTS Intelligence counts roughly 44 million U.S. adults as subprime, or 17% of consumers, with 55% living paycheck‑to‑paycheck and 19% using buy now, pay later services. For small‑business lenders, a survey of 350 executives found 57% citing inaccurate or incomplete business records as an underwriting obstacle, and microbusiness credit applications approved at a 77% rate versus 95% for large enterprises, with 19% rejected for insufficient information.
The CFPB’s earlier report on credit invisibility highlighted the gap in traditional scoring, showing millions of adults lack sufficient credit history. PYMNTS Intelligence had previously noted that a large share of subpri
What we know
Roughly 25 million U.S. adults lack enough recent credit activity to generate a usable score.
35% of subprime consumers have neither a credit nor store card.
Personify Financial says verified bank-transaction data increased approvals by up to 8% among underserved consumer segments while maintaining credit costs.
Affirm’s latest underwriting model generated 3.4% more completed purchases at comparable risk by approving eligible applicants its previous system had declined.
Plaid’s LendScore model shows a 73% approval rate versus 65% for a traditional benchmark at equivalent risk.