In a major shift in underwriting practices, major banks are working together on a pilot program to share consumer account data in an effort to extend credit to thin-credit-file customers.

Why should we care?
Banks have traditionally relied on credit scores when deciding to offer lending products to consumers. Using credit scores only has been critiqued because it leaves out certain types of payments that aren’t reported to credit bureaus, including rent, utilities, and other bills. Many argue that this method can leave some minority communities out. The pilot grew out of a government-backed program under the auspices of the Roundtable for Economic Access and Change, or Project REACH, which was launched by the Office of the Comptroller of the Currency (OCC) last year. According to a report, about 10 banks have agreed to share data under this program, and are reportedly talking to credit reporting agencies about ways to share consumer deposit account data for underwriting purposes. The initiative is aimed at those who exhibit good payment behavior and are otherwise challenged in establishing a credit history upon which lenders can rely. Banks are also reportedly talking to data aggregators such as Plaid and Finicity to share information about on-time rent and utility payments that may be excluded from traditional credit reports. While getting consumer permission to access account data may be a hurdle in banks’ efforts to roll out cash flow underwriting, it just may be the first step along a trajectory of new ways to extend credit to the 50 million credit-challenged adults in the U.S.