Alternative data, defined as information beyond conventional credit accounts, includes signals such as Buy Now, Pay Later activity, rental payment histories, employment and income data, and behavioural indicators. When combined with traditional credit data, these inputs provide a more comprehensive picture of a consumer’s financial health. This is particularly important for “thin-file” or “credit invisible” individuals, who may lack sufficient credit history despite being financially responsible.

The report reveals that adoption of alternative data is already delivering measurable benefits. Notably, 72% of lenders report improved portfolio performance when incorporating alternative data into their decisioning processes. Furthermore, broader data strategies have led to increased approval rates by helping lenders identify creditworthy borrowers who might otherwise be overlooked.

At the same time, affordability has become a central focus in lending decisions. With rising living costs and interest rates, nearly all lenders now incorporate affordability assessments, shifting toward real-time evaluations of income and financial resilience rather than relying solely on historical behaviour. This move aligns with regulatory initiatives aimed at expanding access to affordable credit, particularly as one in eight UK adults is considered financially stressed.

Despite this progress, challenges remain. Data gaps continue to limit lenders’ ability to confidently assess certain borrowers, with approximately 17% of respondents citing lack of reliable data as a key barrier to expanding credit access. In addition, concerns about higher default rates and regulatory complexity contribute to cautious lending practices, particularly when serving underserved populations.

Looking ahead, the report highlights growing confidence in alternative data, with 61% of lenders indicating increased trust in their use for decisioning. As data ecosystems mature and new sources become more reliable, lenders are expected to expand their use of alternative data even further. At the same time, the convergence of credit risk and fraud detection is emerging as an important trend, as organizations integrate systems and share insights to strengthen decision-making.

Ultimately, the future of lending will depend on the ability of financial institutions to integrate multiple data sources into a unified view of the consumer. Those that successfully leverage both traditional and alternative data will be better positioned to improve risk assessment, expand financial inclusion and compete in an increasingly complex market.

Want to learn more? Read the full report: The Growing Role of Alternative Data in Credit Decisioning