The bureau wants to know if consumers’ savings and bill payment activity could enable better predictions about their ability to repay loans, particularly for those with lower credit scores and serious delinquencies.
08/03/2023 1:55 P.M.
1.5 minute read
Consumers’ savings and bill payment habits can help lenders evaluate repayment for loans, according to initial studies on “cashflow data” from the Consumer Financial Protection Bureau.
The CFPB’s Making Ends Meet survey called for consumers to self-report their accumulation of savings, savings schedules, if they have overdraft fees, and if they pay bills on time, according to a blog post from the bureau.
The general takeaway was that cashflow data for consumers, especially those with credit scores under 720, may improve their borrowing options.
However, the bureau notes the sample size is small and only based on the consumers who responded to these components of the survey.
“More research is needed to understand the extent to which cashflow data might enable better predictions about a person’s ability to repay their loans,” the blog post states.
The cashflow data can also help lenders identify if a consumer has become seriously delinquent on any of their accounts, even if their credit score indicates otherwise, according to the CFPB.
Among the findings from the study:
- Consumers who reported they have at least $3,000 across their checking and savings accounts were also more likely to have high credit scores.
- Consumers with higher credit scores were more likely to report positive savings and no overdraft fees.
- Consumers in this credit score group also reported regularity in paying their mortgage, rent, utilities and major household expenses, meaning they have positive cash flow.
The CFPB notes the sample size of the data is relatively small, but linking it to checking account data and credit bureau records may yield more results on cashflow and underwriting.
Read more on the data here.