Streamlined Access to Financial Data Helps Lenders Expand the Affordable Credit Marketplace

In a Nutshell: With more consumers struggling with either no or low credit scores, lenders increasingly see the need to tap into transactional data from checking accounts to make more informed credit decisions. Bloom Credit helps banks, credit unions, and fintechs combine traditional and alternative data to develop a more precise view of a consumer’s ability and willingness to repay. Bloom Credit also helps credit industry data furnishers interact with the three major U.S. credit bureaus. Making sense of copious amounts of financial data through Bloom Credit helps lenders find more reasons to say yes.

Experian, one of the three major U.S. credit bureaus responsible for producing credit reports and scores, reported in 2022 that 49 million Americans were either credit invisible or credit unscorable.

Credit invisibles simply have no credit record. Many are just entering the system as young adults or participate in the economy as new arrivals. Credit unscorables may have qualified for affordable credit in the past but don’t have enough current data to produce a score.

Another 57 million had subprime credit scores. In other words, the report revealed at least 106 million consumers could not participate in the financial system on an equal footing with their peers. For them, less access to affordable credit meant less ability to use credit productively to improve expense flow and invest in the future.

That’s 42% of the adult population. The credit industry makes life easier and improves the economy. It wouldn’t exist if it didn’t. Such a significant portion of consumers locked out of affordable credit means significant untapped economic potential that ultimately holds all of us back.

It’s also a massive prospective market for banks, credit unions, and fintechs if only there were a way to reach it. Bloom Credit helps lending institutions tap the market of credit invisibles, credit unscorables, and subprime credit consumers by supplying alternative data — checking account transactional data related to rent, telecommunications, and utility payments — to provide a fuller picture of the credit landscape.

That picture helps lenders differentiate themselves in an overcrowded credit marketplace, engage customers, retain deposits, and ultimately extend more credit to more consumers. Better access to affordable credit reduces reliance on costly payday loans and makes the system work better for everyone.

“The thing about credit is you don’t know you need it until you need it — lenders having the ability to help this huge population is critical,” said CEO Christian Widhalm. “This isn’t a secured card or an educational session. It’s actionable data that allows people to demonstrate their creditworthiness and lenders to serve them.”

TransUnion, another of the three major U.S. credit bureaus, started as a holding company in the railcar industry. It only began processing credit records when it saw a gap in the marketplace and acquired a regional credit bureau on the way to building a national credit reporting strategy.

We mention it because we think it helps our case that the U.S. credit reporting system is a complex industry constantly evolving to meet changing needs. In a classic chicken-and-egg scenario, the credit bureaus rely solely on lending data to produce credit scores. It’s hard to create a score if you don’t have credit. No one sat in an office and planned it this way.

Widhalm said it’s not surprising the system may not be adequate to meet today’s needs because the bureaus and others did not design it to handle alternative data. By expanding access to high-quality alternative data from checking transactions, Bloom Credit expands access to affordable credit because it helps lenders make more informed decisions.

“Your credit history predicts your willingness to repay, but your cash flow predicts your ability to repay,” Widhalm said. “There’s a difference between the two.”

At its core, Bloom Credit is a B2B credit data infrastructure provider that works through APIs. Bidirectional access to the major credit bureaus allows clients to code into the platform and receive standardized data from all three bureaus with no need for in-house management.

“They can literally code in one API into Bloom and get access to everything they need,” Widhalm said.

The credit industry relies on thousands of data furnishers to connect to the bureaus and communicate lending transaction data. Bloom Credit also claims robust business that helps credit industry data furnishers communicate with the bureaus according to industry standards.

Credit report errors are more common than you may think. Bloom Credit takes raw data from client systems and runs about 700 data quality checks and validations to make sure it’s accurate.

“Our clients don’t have to understand the 400 pages of the Credit Reporting Resource Guide to remain compliant,” Widhalm said. “It’s essential for us to make their data as accurate as possible.”

Make no mistake — credit report data is crucial for lenders to judge how borrowers behave with borrowed money. Bloom Plus, Bloom Credit’s newest product, helps lenders take a broader view of a borrower’s financial history by considering their ability, not their willingness, to repay.

In 2024, Bloom Plus won the Best of Show award at FinovateSpring, the fintech industry’s leading West Coast conference based in San Diego. It enables tens of thousands of U.S. financial institutions to offer depositors a brand experience that builds credit from checking transactions and payments.

The experience is seamless. Bloom Credit’s bank, credit union, and fintech clients receive a white-label experience. Customers and members only need a few minutes to onboard and connect their accounts.

The platform then shows users all of their recurring monthly payments that are eligible to be converted into trade lines with the major credit bureaus. It also counts payments for cellphone and home internet access and utilities — water, gas, and electricity.

Users have the option to submit some or all of those potential trade lines with up to 24 months of history after the platform performs verification and attestation duties.

“They hit a button, and we convert all of that history into trade lines and post it to the bureaus,” Widhalm said. “People can actually see significant score impact within 24 hours, particularly for those invisibles and unscorables with no dings on their record.”

Counting on-time rent payments is a significant perk for many credit-challenged consumers. Widhalm said many landlords simply don’t bother to become credit industry data furnishers because it’s too much trouble. Others charge exorbitant fees for what ought to be a very low-cost service.

“We think consumers are much better served by partnering with their financial institution rather than purchasing a service from their landlords,” Widhalm said. “Financial customers can leverage their excellent payment histories while avoiding unreasonable fees.”

Bloom Credit went live with Bloom Plus at FinovateSpring. It rolled out partnerships around the product with five additional clients in Q4 2024. At that point, several other banks with a significant regional presence were in talks to adopt it.

It’s an idea whose time has come. Widhalm said there’s a natural fit between Bloom Plus and all financial institutions with a strong consumer focus. The fit is closest with credit unions and their people-helping-people mission and fintechs looking to get a leg up on the competition.

“Both segments are obviously trying to take care of the consumer while figuring out how to differentiate themselves from traditional banking,” Widhalm said. “They’re looking to fine-tune their offerings and deliver something to create better outcomes and the halo effect that goes with them.”

However, Bloom Plus is a no-brainer for all financial institutions. In addition to the halo effect of customers appreciating the value-added service of free credit reporting, Bloom Credit customers receive a halo effect stemming from their status as good citizens of the credit reporting industry.

Bloom Credit customers also report increased deposit acquisition, activation, and retention from customers coming on board to access and use perks. They gain significant insights into customer behavior through curated access to the same data Bloom Credit reports to the bureaus.

Most importantly, they gain loan growth. Through streamlining the reporting of alternative — and traditional — credit data, Bloom Credit helps lenders get to a yes more readily because more applicants have scores. They become eligible for entry-level mainstream credit products and can begin a lifelong banking relationship.

In closing our conversation, Widhalm stressed that through Bloom Plus, Bloom Credit provides an actionable solution to the problem of chronic lack of credit access, not one that inevitably leads to more debt. He said the efficiencies of data reporting through Bloom Credit make the company’s combination of traditional and alternative data practical for all providers.

“Honestly, I think that within five years, every bank and credit union will provide this,” Widhalm said.