Grocery shopping habits prove credit worthiness, aiding those without credit history

Recent advances in artificial intelligence and machine learning, coupled with the evolution of large-scale data storage, access and processing technologies, have fueled interest among financial institutions in new data sources for credit scoring.
Examples of these new sources include bill payment histories for phone, utility and streaming services; transaction records from checking, savings and money market accounts; and rent payment histories. The motive is twofold — pursuit of profit, including generating new accounts, and improving social welfare by extending credit access to those who lack traditional credit scores.
New research from the University of Notre Dame shows that repeated trips to the grocery store may be all that’s necessary to prove creditworthiness.
“Using Grocery Data for Credit Decisions” is forthcoming in Management Science from Joonhyuk Yang, assistant professor of marketing at Notre Dame’s Mendoza College of Business, along with Jung Youn Lee from Rice University and Eric T. Anderson from Northwestern University.
The team partnered with a multinational conglomerate operating in multiple cash-reliant, developing countries in Asia and Africa. The data sponsor owns a credit card issuer and a large-scale supermarket chain, which enabled the researchers to merge data from the two domains and observe the behaviors of 30,089 consumers.
They began by transforming the raw data into a more effective set of inputs and removed signals of credit risk from grocery data.
“Our approach was motivated by our conversation with the manager of the data sponsor, who said, ‘To work with these huge data sets, you need a strategy for summarizing the key pieces of data into meaningful variables. A naive approach of simply throwing all our data at this problem without any structure is unlikely to work,’” Yang said. “This remark resonates with another comment made by a manager at one of the leading banks in the U.S. with whom we spoke. The manager mentioned that the major obstacle to utilizing large-scale, granular consumer data in the making of loans is not a lack of access to such data, but rather a lack of knowledge on how to leverage them efficiently.”
Repeated grocery shopping habits point to signals of credit risk.
Buying cigarettes or energy drinks is associated with a higher likelihood of missing credit card payments or defaulting, while purchasing “good” or healthy groceries, including fresh milk or vinegar dressings, is linked to consistently paying credit card bills on time.
“Guided by an extensive body of literature on habits, we construct variables that measure the level of consistency, or lack thereof, in what and how customers buy,” Yang said. “Grocery data lends itself particularly well to measuring general consumer traits because groceries are non-durable necessities, so consumers make frequent and repeated choices.”
What an individual buys can help explain what type of payer they are, even after controlling for various socio-demographic variables and credit scores.
“Using item-level survey ratings, we find suggestive evidence that buying healthier but less convenient food items is predictive of responsible payment behaviors,” Yang said. “We also see a positive and robust correlation between consistency in various dimensions of grocery shopping and making timely credit card bill payments.”
Cardholders who consistently pay their bills on time are more likely to shop on the same day of the week, spend similar amounts across months and purchase the same brands and product categories.
Through a simulation of hypothetical credit scoring and decision-making processes, the team demonstrates that grocery data can offer informative signals of credit risk, leading to improved credit outcomes for creditworthy individuals and increased profitability for lenders.
For instance, incorporating grocery data substantially improves default predictive accuracy for people without credit scores, resulting in an improvement ranging from 3.11 to 7.66 percentage points.
The study also characterizes conditions under which the use of grocery data adds no incremental value, which can shed light on when lenders might be incentivized to collect, acquire and leverage alternative data.
“Specifically, we find that the incremental benefit of grocery data diminishes sharply as traditional credit scores or relationship-specific credit history becomes available,” Yang said. “These findings highlight the potential for financial institutions to utilize grocery data to extend credit to individuals who lack traditional credit scores while demonstrating the limitations of this new data source.”
The findings have direct managerial implications for lenders, as using grocery data for credit scoring presents an opportunity to access a vast, untapped market. Lenders can expand their customer base and improve their profitability by extending credit to consumers who are currently unserved or underserved by the traditional credit system.
Contact: Joonhyuk Yang, joonhyuk.yang@nd.edu
Latest ND NewsWire
- Navigating the waters of peace: Researchers address challenges, opportunities in implementation of Colombia's Peace AgreementNearly half of the commitments outlined in Colombia's historic peace accord face significant challenges and may not happen in time unless policymakers make several key interventions, warns a new report from Notre Dame's Peace Accords Matrix. The report offers a blueprint to salvage an accord that has lagged behind its implementation deadlines, putting its legacy at risk. It highlights timely fixes that can strengthen the agreement.
- ‘Returnless returns’ boost brands among consumersReturnless returns can increase brand support by fostering goodwill, according to John Costello and Christopher Bechler, assistant professors of marketing at Notre Dame’s Mendoza College of Business. Their study, “Just Keep It: When and Why Returnless Product Returns Foster Brand Support,” is forthcoming in the Journal of Marketing Research.
- Father-daughter bonding helps female baboons live longerNew research from the University of Notre Dame found that the strength of early-life father-daughter relationships predicts meaningful differences in the survival of female baboons.
- Notre Dame honors Carmi and Chris Murphy with 2025 Sorin AwardIn recognition of their contributions to the University of Notre Dame and service to the South Bend community, Carmi and Chris Murphy were presented with the 2025 Rev. Edward Frederick Sorin, C.S.C., Award on May 31 at the Alumni Association’s annual reunion celebration.
- Partial peace deals may facilitate comprehensive accords, offering roadmap for policymakers, practitionersPartial peace agreements — deals that address targeted issues on the way to larger comprehensive accords — could provide a blueprint for peacebuilding policymakers and practitioners, according to new University of Notre Dame research.
- Fatal school shootings have lasting impact on local economiesNew research from the University of Notre Dame offers the first large-scale empirical evidence that community anxiety caused by fatal school shootings can impact routine consumption behaviors like grocery shopping and dining out.