Latest / Fintech Conversations with Fexingo: Banking, Payments, and Financial Software Companies / How Fintechs Use Real-Time Utility Payment Data for Credit Scoring
Transcript
- Lucas: So Luna, I want you to think about the last time you paid your electric bill. Did you know that every on-time payment you made could be helping — or hurting — your credit score, even if you've never carried a credit card balance? Luna: I mean, I know some utilities report to credit bureaus, but I don't think most people realize it's actually happening. How widespread is this? Lucas: It's still fairly niche, but it's growing fast. There's a company called Esusu that's partnered with property managers to report rent and utility payments to the major credit bureaus. They've already onboarded over a million units, and they're seeing a really consistent pattern: about 45 million Americans have what's called 'thin files' — fewer than five credit accounts. Utility data can give them a score almost overnight. Luna: Forty-five million is huge. And I assume this isn't just about helping consumers — lenders must love having more data points, right? Lucas: Exactly. The data shows that when lenders incorporate utility payment history into their underwriting models, default rates drop by about 30 percent compared to traditional scoring alone. And the average credit score for someone with utility data on file goes up by about 15 percent. That's the difference between a subprime rate and a prime rate on a mortgage. Luna: So how does this actually work technically? Are utilities sending data in real time to the bureaus? Lucas: Mostly it's not real-time yet — it's batch reporting, usually monthly. But there are fintechs like Plaid and Finicity that are starting to offer real-time access to utility payment data through open banking APIs. So instead of waiting for a monthly report, a lender could see your last six months of water bills instantly at the point of application. Luna: That's interesting because it shifts the power dynamic. If I know my utility payments are being watched, I might be more diligent about paying on time. Lucas: Right — it creates a feedback loop. And the Consumer Financial Protection Bureau has been pushing for this kind of alternative data. They issued a rule last year that encourages lenders to consider non-traditional data sources, including utility and telecom payments, as long as the models are fair and not discriminatory. Luna: But there's a privacy concern, isn't there? If I don't want my utility data shared, do I have a choice? Lucas: That's the big open question. Under the Fair Credit Reporting Act, consumers have to give consent for data to be used in credit decisions. But the consent forms are often buried in the fine print of a lease agreement or a utility contract. Esusu, for example, requires tenants to opt in, but the opt-in rate is reportedly over 90 percent — which suggests a lot of people either don't read it or feel pressured to say yes. Luna: Ninety percent opt-in sounds high. Maybe people genuinely want their good payment history reflected? Lucas: I think that's part of it. But there's also a knowledge gap — most consumers don't know how much weight utility data carries. The credit scoring models have been updated. VantageScore 4.0, for instance, explicitly incorporates rent and utility data. And FICO has a version, FICO Score XD, that uses alternative data including utility payments. Luna: So if I'm a renter with no credit card but I've paid my electricity bill on time for two years, what kind of score could I see? Lucas: Depending on the model, you could land in the mid-600s to low 700s. That's enough to qualify for a lot of prime credit products. Esusu's data shows that after 12 months of reporting, about 60 percent of previously unscorable consumers become scorable. Luna: That's a massive shift. So the fintechs that are aggregating this data — are they making money by selling it to lenders, or by charging consumers? Lucas: The business model varies. Esusu charges property managers a fee for the reporting service — it's a B2B play. Other companies like UltraFICO or Experian Boost let consumers voluntarily link their bank accounts to add utility and phone payments to their credit file. Experian Boost is free for consumers, but it drives engagement with Experian's broader product ecosystem. Luna: So there's a consumer-facing angle and a lender-facing angle. Which one do you think will dominate? Lucas: I think the lender side will grow faster because the ROI is so clear. A 30 percent reduction in defaults is a huge incentive. But the consumer side is important for trust and adoption. If you feel like you're being surveilled without benefit, you'll opt out. The fintechs that are transparent about how data is used — and give consumers control — will win in the long run. Luna: Speaking of trust, there's a risk of bias, right? If utility data reflects historical disinvestment in certain neighborhoods, could it perpetuate redlining? Lucas: That's the critical critique. If you're in an area with unreliable utility infrastructure or inconsistent billing cycles, your payment history might look worse than someone in a well-served area. The CFPB has been explicit that alternative data models must be tested for disparate impact. The good news is that because utility data captures a broader swath of the population — including people who are 'credit invisible' — it can actually reduce bias if used carefully. Luna: Right, but 'if used carefully' is doing a lot of work there. Let's talk about a specific example. You mentioned Esusu — what's their actual impact been? Lucas: Esusu reported that in 2025, their platform helped over 100,000 renters improve their credit scores, with an average increase of 28 points after six months of reporting. They also found that renters who used their service were 17 percent more likely to be approved for a mortgage within two years. Those are real numbers. Luna: That's pretty concrete. And do they only do rent, or utilities specifically? Lucas: They focus on rent, but they're expanding into utility data through partnerships with property management software like AppFolio and Yardi. The idea is that if you already have the rent payment data, adding utility data is a low incremental cost. And the combined dataset is more predictive than either alone. Luna: So what's the next frontier? I'm guessing water and electricity are just the beginning. Lucas: Absolutely. We're already seeing fintechs look at telecom data — cell phone bills, internet service — and even streaming subscriptions. On-time Netflix payments aren't a credit signal yet, but if you consistently pay your internet bill, that's a reliable indicator of financial stability. The challenge is that not all utilities are created equal: some are regulated monopolies with strict data-sharing rules, others are competitive markets. Luna: And what about gas and electric companies that have their own payment plans or assistance programs? How do you handle partial payments or late fees? Lucas: That's where the modeling gets nuanced. The fintechs typically look at the percentage of on-time payments over a rolling 12-month window. A single late payment due to a billing error shouldn't sink your score, but chronic lateness will. Some models also factor in the dollar amount — missing a $50 water bill is different from missing a $500 electric bill. Luna: So the granularity is there. But how do you ensure the data is accurate? If a utility reports a late payment that was actually paid on time, what recourse does the consumer have? Lucas: Under the FCRA, you can dispute the data with both the furnisher — the utility — and the credit bureau. But we all know how painful that process can be. Some fintechs are building automated dispute tools that use the real-time payment confirmation from the utility to correct errors instantly. It's still early, but companies like Nova Credit are working on this. Luna: So there's an infrastructure play here too. Alright, let's take a step back. For the average listener who pays their utility bills on time but has a thin credit file — what should they do? Lucas: First, check if your utility provider already reports to the bureaus. You can call and ask. If they don't, you can use a service like Experian Boost or UltraFICO to link your bank account and manually add those payments. It takes about five minutes and can give your score an immediate lift. Second, if you're a renter, ask your property manager if they work with a rent reporting service. Many do, and they might not advertise it. Luna: And if they don't, could you push them to start? Maybe as a tenant benefit? Lucas: Absolutely. Property managers are increasingly seeing it as a competitive differentiator. Esusu offers it as a free amenity to tenants, so the property manager pays. I think within five years, most multifamily properties will offer some form of rent and utility reporting as standard. Luna: That's a pretty bullish prediction. Let's pivot to the regulatory side — are there any pending rules that could slow this down? Lucas: The biggest risk is a potential federal privacy law that would restrict how financial data can be used without explicit opt-in. The American Data Privacy and Protection Act has been floating around Congress, and if it passes, it could require a higher standard of consent for utility data. That might reduce opt-in rates and make the datasets less robust. Luna: So the industry is walking a tightrope between innovation and consumer protection. Sounds like a classic fintech story. Lucas: It really is. And the stakes are high — access to credit is one of the biggest drivers of economic mobility. If we can use utility data to responsibly expand credit to 45 million people, that's a huge win. But we have to get the privacy and fairness pieces right. Luna: Alright, I think we've covered a lot of ground. Before we wrap, if someone found this episode valuable — maybe it changed how they think about their own utility bills — what's the best way they can support the show? Lucas: Honestly, if this was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. It's a small gesture, but it keeps us independent and ad-free. And we really do read every message that comes with it. Luna: Yeah, it genuinely helps us keep doing deep dives like this one. And we're always curious what topics you want us to tackle next. Lucas: So to bring it back: utility data is quietly becoming one of the most powerful tools for financial inclusion. The next time you pay your electric bill, remember — that transaction might be doing more for your financial future than you think. Luna: Well said. Thanks, Lucas. Lucas: Thanks, Luna. Talk to everyone next time.