The intense pressure to make loans that count toward CRA requirements has led many financial institutions to court customers they wouldn't have sought in the past.
Banks' growing interest in affordable housing programs and the proliferation of secured credit card issuers over the past year reflect this focus in business related to the Community Reinvestment Act.
One challenge facing lenders is finding borrowers with limited credit experience. Credit bureaus, where most lenders go to authorize loans and find prospective customers, often lack files on such people, or have only limited information about them.
But this situation may soon change.
The three major credit bureaus, TRW Information Systems and Services Inc., Trans Union Corp., and Equifax Inc., are examining how they can help their customers reach deeper into the population.
The bureaus say some of the biggest players in the home lending and credit card businesses have asked them to collect data from nontraditional sources like utility, phone, and cable companies, as well as from landlords.
Fannie Mae, the Federal National Mortgage Association, has been a driving force for gathering such information. The quasigovernmental agency sees use of this sort of data as helping people with low income or scanty credit histories become homeowners. In a draft of Fannie's position, the agency said the objective of collecting information from new sources is "to build a solid credit history," not to offset a "derogatory" one.
Alternative data have not been collected in the past. Sometimes, as with information from public utilities, regulatory issues are involved. Also, the credit bureaus have not determined whether a consumer's record of payments to a cable, telephone, or utility company predicts ability and willingness to repay a loan.
The credit bureaus appear to have the most interest in starting nontraditional data files with utility payments, because information from this highly regulated industry is presumably accurate and easily verifiable.
"If people cannot manage their utility bills, they probably can't manage other things," said Jim Conran, president of Consumers First, an advocacy group based in Orinda, Calif.
So far, only Chicago-based Trans Union has started to collect utility payment information on a limited basis. Equifax and TRW plan to do so.
"We are looking at what we have to do to collect that data, and discussing the data needs of our customers," said Martin E. Abrams, director of TRW's privacy and consumer policy.
A spokesman for Equifax said it expects to have firmer plans within six months. Atlanta-based Equifax already offers a service to utilities that disseminates information among them.
In the meantime, Associated Credit Bureaus Inc., the trade group of credit bureaus, is developing a data base or "metro tape" that would standardize the collection of nontraditional data.
Norm Magnuson, director of public affairs for the trade group, said the idea behind the new metro tape is for credit bureaus to create a second file for people who have shallow credit histories.
"The general move in the market is to set up two separate credit files. When there is a lack of information on a consumer, a lender could request this second file," said Mr. Magnuson. "But there is no need to create the extra file for consumers who have a standard credit history."
Lenders who have been providing credit to people with spotty payment histories are eagerly waiting for the credit bureaus to complete their research.
"Just because there is no credit bureau report does not mean that people have not established themselves," said Robert Elbert, vice president of direct credit of National City Bank, Columbus, Ohio.
When people with insufficient payment histories apply for credit, National City often asks them to provide old bills and canceled checks. "It would certainly be beneficial if this information was available from the credit bureaus," Mr. Elbert said.
Trans Union's senior vice president, Bill Rodgers, said, "Lenders will use this information to reach immigrants and young adults, and some lenders see it as a way to verify current addresses."
There are still many obstacles before collecting even the most desirable data - utility payments - is a standard practice.
Only a handful of states allow public utility companies to share information with credit bureaus, so state legislatures in many cases would have to introduce new laws.
Mr. Conran, who used to work for a public utility company, believes some utilities may see an money-making opportunity in providing credit bureaus such information. But because of privacy issues, many utilities may resist sharing their information, he said.
The consumer activist pointed out that some of his colleagues are against public utilities sharing data with commercial entities. Some consumerists believe that because utilities provide essential services they should be treated differently from, say, a bank that lend money or issues a credit card.
Mr. Conran said: "There are consumerists who will fight this movement."