India’s credit ecosystem has expanded over the past decade, yet a large section of the population remains outside the formal lending framework.
For millions of Indians, the dream of owning a home often runs into a familiar obstacle: no credit history.
Young professionals. First-job earners. Migrant workers. Freelancers. People who have never taken a loan or owned a credit card.
Despite earning regularly and paying their bills on time, many of them struggle to prove their creditworthiness when they finally apply for a home loan.
That, however, may be beginning to change.
Lenders and fintech firms are increasingly exploring alternative data sources to assess borrowers who are “new-to-credit” — a category that includes people with little or no formal borrowing history. Among the strongest indicators emerging in this space is something millions already do every month: pay rent.
The idea is simple. If a person has paid rent consistently for years, often accounting for a significant portion of their monthly income, that payment behaviour may offer valuable insight into their ability to handle future loan EMIs.
The Credit History Problem
India’s credit ecosystem has expanded rapidly over the past decade, yet a large section of the population remains outside the formal lending framework.
A TransUnion CIBIL study found that more than 160 million Indians were classified as credit underserved, while nearly half the adult population had little or no formal credit history. The absence of a credit score often makes it difficult for first-time borrowers to access loans despite having stable incomes and sound financial habits.
This gap is particularly visible among young urban workers.
Many spend years paying rent before they consider purchasing a home. In expensive cities, rent can consume 20-30 per cent or more of monthly income, making it one of the largest recurring financial commitments households undertake.
Yet those payments have traditionally remained invisible to lenders.
Why Rent Payments Matter
Industry experts argue that rental history captures a form of financial discipline that conventional credit models often miss.
Sarika Shetty, Co-Founder and CEO of RentenPe, says renters who consistently pay on time are effectively demonstrating their ability to manage a recurring financial obligation month after month.
According to Shetty, verified rent payment records can provide lenders with a clearer picture of an individual’s payment behaviour, reliability and financial discipline, especially when conventional credit data is limited or absent.
The logic closely mirrors how lenders evaluate EMI repayment histories.
A tenant who has paid Rs 20,000-Rs 40,000 every month for several years has already demonstrated the ability to manage a recurring expense comparable to a home loan instalment.
“The goal is not to replace traditional credit scores but to strengthen them by incorporating real-world financial behaviour that has historically gone unrecorded,” Shetty argues.
A Global Shift Towards Alternative Data
The use of alternative data in lending is not unique to India.
Across global financial markets, lenders increasingly analyse utility payments, telecom bills, digital transactions and rental payments to assess borrowers who lack conventional credit records.
India’s lending ecosystem is also moving in that direction.
Recent industry discussions and policy developments have focused on expanding credit access for new-to-credit borrowers through wider use of digital data and alternative financial signals. The broader push aligns with efforts to improve financial inclusion and bring more first-time borrowers into the formal credit system.
Banks and financial institutions are increasingly evaluating non-traditional indicators such as utility payments, telecom bills and digital transaction histories when assessing first-time borrowers.
Rental payment records could become a natural extension of that trend.
Building A Financial Identity Through Rent
Several fintech firms are now trying to formalise rental history and convert it into a usable financial profile.
Shetty says RentenPe has developed an “R Score” based on verified rent payment data to help establish a documented rental history for tenants.
The broader idea, she says, is to create a rental identity layer that allows responsible renters to build financial credibility over time and potentially improve access to future financial products, including home loans.
While such models are still evolving, they reflect a growing recognition that financial responsibility extends far beyond traditional loan repayments.
What It Means For First-Time Homebuyers
The implications could be significant.
For decades, aspiring homeowners often faced a paradox: they needed a credit history to obtain a home loan, but needed access to credit to build that history in the first place.
Recognising rental payments could help break that cycle.
