Right now, credit scores mostly rely on loans and credit card history, but what about rent payments, UPI transactions, or utility bills? Many people pay their rent on time but don’t use credit—shouldn’t that count too?
If alternative data were used, more people could build credit easily. But could it also hurt scores if someone misses a bill? Would banks trust this data?
The current credit scoring system relies primarily on loan history and credit card payment records. Your credit score remains unaffected when you never obtain loans or credit cards even though you consistently pay your rent and utility bills on time. The current system appears unjust because numerous responsible individuals who avoid taking credit still handle their finances effectively.
The inclusion of rent payments and UPI transactions and utility bills in bank records would enable responsible people to establish credit without requiring loans. Timely rent payments would enhance credit scores which would result in improved loan opportunities for the future.
The system shows promise as a credit-building tool yet it requires fair implementation to succeed.