Most lenders rely on alternative credit score data to assess risk

As mortgage lenders continue seeking ways get more trustworthy consumers into the housing market, a majority of them are utilizing alternative credit as a means of assessing borrower risk.

About 80% of lenders now claim they rely on a credit report plus additional information when making a credit decision, according to Experian's State of Alternative Credit Data report.

Mortgage loans, with any given set of characteristics, are performing better than they ever have before, but at the same time, lenders are taking on much less risk than they have before, according to Laurie Goodman, center director at the Urban Institute.

And while the industry looks to form healthy habits to expand the credit box, half of consumers also believe that including items like a utility or phone bill will more positively affect their credit score.

It's important to note that giving consumers more opportunities to prove themselves doesn't necessarily mean they are more risky, as analyzing additional information will help paint a clearer picture of borrower behavior.

"While we are best known for the traditional credit scores we provide, we recognize that a score is a mere snapshot in time," Alex Lintner, president of consumer information services at Experian, said in a press release.

"We believe everyone deserves access to quality credit. When you give lenders the opportunity to layer on additional sources of data — like trended data, attributes, rent and utility payment history, and short-term loans — suddenly a much more comprehensive picture of the consumer emerges," he continued.

While many lenders may be open to including payment and utility bills on a consumer's credit score, regulatory hurdles, specifically at the state and local level, remain.

Certain rules in regulation prevent utility and telecommunications companies from providing on-time payment data to credit bureaus. This may not be the case for long though, as Congress is considering the Credit Access and Inclusion Act, which would adjust the Fair Credit Reporting Act to allow these types of companies to report positive credit data such as timely payments.

The bipartisan legislation passed the House of Representatives unanimously at the end of February and is currently being debated by the Senate.