Credit scores look at past behaviors. Cash flow underwriting looks at now. That shift—from historical snapshots to real-time financial activity—is unlocking credit access for borrowers who manage their money responsibly but carry the weight of past financial difficulties in their traditional credit data. Here are the latest insights from three organizations pioneering this approach.

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Relying on historical data has long been the standard in institutions’ financial decision-making. Investors analyze past performance to identify the best stock picks of today. Small businesses review last season’s sales to plan for the new year. And lenders, of all stripes, have used credit scores, which rely upon a relatively limited set of data points from the past to determine a borrower’s ability and willingness to pay going forward.

But imagine being heavily assessed on who you were, rather than who you are today? Imagine if job applications and hiring managers relied only on your entry level work, as opposed to the built up experience and responsibilities of the more recent past? Traditional credit decisioning relies on credit history data that is frustratingly slow to respond to positive changes in behavior, limited in context, and for some borrowers, may not even exist.

Enter cash flow underwriting, a rapidly growing approach to underwriting being used by national and regional banks, financial technology companies, and nonprofits alike. Credit reports offer static insights about the past, similar to a photograph; cash flow underwriting provides a view into the real-time, financial motion picture of an individual.

Expanding Opportunity With A Real-Time Tool

Cash flow underwriting is an approach to making credit decisions that analyze real-time financial activity from individual transactional accounts in order to identify spending patterns, various income types, and debt management trends, providing lenders with a broader, more inclusive, and faster assessment of a person’s ability and willingness to pay. Paired with traditional credit risk assessment, cash flow underwriting allows lenders to both safely expand their borrowing pool and provide those borrowers with access to more accurately priced credit.

A limitation of using only traditional credit scoring is the lack of insight into current financial management, relying almost exclusively on past credit behavior. For instance, even with recent changes, credit bureaus may not  capture on-time rent or utility payments, often a strong indicator of financial stability and willingness to pay. Cash flow underwriting can also complement the more static data of credit scores by providing real-time insights into spending patterns, helping spot moments of distress or opportunity faster.

Recognizing the outsized role that credit plays in an individual’s financial life, ideas42 launched Credit: Expanding Opportunity, a three-year initiative designed to unlock credit opportunities for individuals with sub- and near-prime scores. In our first year, we partnered with Prism Data to explore how cash flow underwriting can deepen the impact of innovative organizations already committed to improving financial health through credit building and saving. Prism’s cash flow analytics products transform raw transaction data into actionable intelligence that helps lenders expand approvals, lower losses, and predict credit risk more accurately. Here’s how it can help providers offer credit to an expanded customer base.

Insights from the Field

1) Tapping into Expanded Markets: Prism’s cash flow underwriting solution allows for targeted validation, unlocking new customer segments

Prism partnered with Arro, a credit-building fintech platform aimed at helping people with limited or no credit history, and allowed Arro to run targeted validation tests on market segments that Arro had never evaluated before—for example, testing performance of potential customers with low-balance accounts. Coupled with the ability to reinterpret data signs, Arro estimates that this partnership could help them safely increase their approval-eligible population by up to 50%. In a short period of time, they saw a 5% approval lift on the expanded population.

2) Identifying and Validating New Data Signals: With greater context of financial behaviors and activities, cash flow underwriting can turn a No into a Yes

Prism reviewed transactional data from a pool of previous Arro applicants to spot signs indicating an ability to repay loans. This analysis uncovered an opportunity to expand Arro Card approvals to users with consistent bank account balances above $50. They were also able to identify warning signs of future repayment difficulty, including high discretionary spending relative to income. While it is too early for Arro to have data on performance of this new population, these types of warning signs can help providers proactively intervene, coach and support borrowers to maintain repayment stability.

“Cash flow data is the sole reason we’re able to responsibly assess risk and approve consumers who are invisible to traditional credit models. Prism expanded our field of vision further by uncovering more creditworthy segments we can serve, ultimately helping more people build better financial futures.” — Abby Wood, Chief Strategy Officer, Arro

3) Faster Insights and Greater Visibility: Cash flow underwriting helps providers uncover signals like pay patterns and use of credit products to enable timely and customized interventions

The C:EO initiative also facilitated a partnership between Prism and SaverLife, a nonprofit that helps build financial security for working families. SaverLife has long used customer data to inform timely interventions and encourage savings behaviors, and Prism’s account access and machine-learning capabilities allowed them to leverage data points they hadn’t previously been able to see. Through the partnership, SaverLife and Prism analyzed over 3 million member transactions uncovering profound insights—pay patterns for gig work, cash flow trends, and even use of Buy Now, Pay Later and Earned Wage Access products. These financial signals and indicators enabled SaverLife to match members with the right resources, particularly around debt reduction and savings. SaverLife now offers personalized platform interventions, such as rounding up debt payments and activating autosave and generally strengthening their evolving rapid response services. These changes mean people can access products that are better matched to their needs.

“Through our partnership with Prism, SaverLife can rapidly unlock the full potential of our members’ cash flow data, ensuring our members gain real value—in the form of savings realized and knowledge gained—from their own financial data points.” — Leigh Phillips, President and CEO, SaverLife

Looking Forward

As people’s financial lives get more complex and move ever faster, providers must keep pace. Lenders who rely on traditional credit data alone for their decision-making will miss opportunities to serve borrowers who have demonstrated ability and willingness to repay. Using a more comprehensive and accurate approach—combining cash flow underwriting and credit history—lenders can help even more individuals achieve a financially healthy future.