Grocery purchase data can accurately predict credit risk for individuals without traditional credit scores, potentially broadening the pool of qualified loan applicants. Photo via Unsplash

Millions of consumers who apply for a loan to buy a house or car or start a business can’t qualify — even if they’re likely to pay it back. That’s because many lack a key piece of financial information: a credit score.

The problem isn’t just isolated to emerging economies. Exclusion from the financial system is a major issue in the United States, too, where some 45 million adults may be denied access to loans because they don’t have a credit history and are “credit invisible.”

To improve access to loans and peoples’ economic mobility, lenders have started looking into alternative data sources to assess a loan applicant’s risk of defaulting. These include bank account transactions and on-time rental, utility and mobile phone payments.

A new article by Rice Business assistant professor of marketing Jung Youn Lee and colleagues from Notre Dame and Northwestern identifies an even more widespread data source that could broaden the pool of qualified applicants: grocery store receipts.

As metrics for predicting credit risk, the researchers found that the types of food, drinks and other products consumers buy, and how they buy them, are just as good as a traditional credit score.

“There could be privacy concerns when you think about it in practice,” Lee says, “so the consumer should really have the option and be empowered to do it.” One approach could be to let consumers opt in to a lender looking at their grocery data as a second chance at approval rather than automatically enrolling them and offering an opt-out.

To arrive at their findings, the researchers analyzed grocery transaction data from a multinational conglomerate headquartered in a Middle Eastern country that owns a credit card issuer and a large-scale supermarket chain. Many people in the country are unbanked. They merged the supermarket’s loyalty card data and issuer’s credit card spending and payment history numbers, resulting in data on 30,089 consumers from January 2017 to June 2019. About half had a credit score, 81% always paid their credit card bills on time, 12% missed payments periodically, and 7% defaulted.

The researchers first created a model to establish a connection between grocery purchasing behavior and credit risk. They found that people who bought healthy foods like fresh milk, yogurt and fruits and vegetables were more likely to pay their bills on time, while shoppers who purchased cigarettes, energy drinks and canned meat tended to miss payments. This held true for “observationally equivalent” individuals — those with similar income, occupation, employment status and number of dependents. In other words, when two people look demographically identical, the study still finds that they have different credit risks.

People’s grocery-buying behaviors play a factor in their likelihood to pay their bills on time, too. For example, cardholders who consistently paid their credit card bill on time were more likely to shop on the same day of the week, spend similar amounts across months and buy the same brands and product categories.

The researchers then built two credit-scoring predictive algorithms to simulate a lender’s decision of whether or not to approve a credit card applicant. One excludes grocery data inputs, and the other includes them (in addition to standard data). Incorporating grocery data into their decision-making process improved risk assessment of an applicant by a factor of 3.11% to 7.66%.

Furthermore, the lender in the simulation experienced a 1.46% profit increase when the researchers implemented a two-stage decision-making process — first, screening applicants using only standard data, then adding grocery data as an additional layer.

One caveat to these findings, Lee and her colleagues warn, is that the benefit of grocery data falls sharply as traditional credit scores or relationship-specific credit histories become available. This suggests the data could be most helpful for consumers new to credit.

Overall, however, this could be a win-win scenario for both consumers and lenders. “People excluded from the traditional credit system gain access to loans,” Lee says, “and lenders become more profitable by approving more creditworthy people.”

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This article originally ran on Rice Business Wisdom based on research by Rice University's Jung Youn Lee, Joonhyuk Yang (Notre Dame) and Eric Anderson (Northwestern). “Using Grocery Data for Credit Decisions.” Forthcoming in Management Science. 2024: https://doi.org/10.1287/mnsc.2022.02364.


Give credit where credit is due. The Woodlands falls in the "very good" category. Photo courtesy of Local Government Federal Credit Union

Houston suburbs charge ahead with some of the highest credit scores in Texas

fit for fico

Give the residents of The Woodlands some credit. They’re able to brag about achieving some of the highest credit scores in Texas.

A new study from personal finance website WalletHub shows the median credit score of a Woodlands resident is 757. Among the 2,572 U.S. cities covered in the study, The Woodlands nabs a 287th-place tie for cities with the highest median credit score.

FICO, the primary producer of credit scores in the U.S., characterizes 757 as a “very good” credit score. On the FICO scale, credit scores range from 300 to 850. A credit score anywhere from 740 to 799 is above the U.S. average “and demonstrates to lenders that the borrow is very dependable,” according to FICO.

WalletHub based the study on September 2021 data from TransUnion, one of the three major credit-reporting bureaus. In the study, The Villages, a retirement community in Florida, is the only city where the median credit score is above 800 — 806, to be exact.

Two other Houston-area suburbs — Montgomery and Friendswood — ranked among Texas cities for the highest credit scores, coming in with a median credit score of 738 and 732, respectively.

Here are the other cities in the top 15 statewide:

  • Colleyville (Dallas-Fort Worth), 777, 23rd nationally.
  • Flower Mound, 762, tied for 185th place nationally.
  • Coppell (Dallas-Fort Worth), 758, tied for 262nd place nationally.
  • The Woodlands (Houston), 757, tied for 287th nationally.
  • Keller (Dallas-Fort Worth), 756, tied for 300th nationally.
  • Allen (Dallas-Fort Worth), 750, tied for 428th nationally.
  • Georgetown (Austin), 749, tied for 446th nationally.
  • Frisco (Dallas-Fort Worth), 748, tied for 467th nationally.
  • Cedar Park (Austin), 743, tied for 568th nationally.
  • Plano (Dallas-Fort Worth), 740, tied for 629th nationally.
  • Montgomery (Houston), 738, tied for 681st nationally.
  • Friendswood (Houston), 732, tied for 784th nationally.
  • Rockwall (Dallas-Fort Worth), 732, tied for 784th nationally.

Among Texas’ biggest cities, Austin is the only one where the median credit score exceeds 700. In the Capital City, the median score is 713, tied for 1,208th nationally. San Antonio is next in line, at 664 (tied for 2,236th nationally), followed by Houston (662, tied for 2281st nationally), Dallas (661, tied for 2,299th nationally), and Fort Worth (615.5, tied for 2,545th nationally).

Bad news for Sugar Land, which is the only Texas city with a median credit score below 600. According to the study, the median score there is 571, putting it in 2,563rd place nationally. FICO identifies that as a “poor” credit score.

J. Keith Baker, a CPA and certified financial planner who teaches at Dallas College’s North Lake campus in Irving, tells WalletHub that the best way to improve or maintain your credit score is to pay your credit card balances in full every month.

“Some folks will close a credit card account thinking it will help them manage their spending and protect them from identity theft since they are not using an account,” Baker says. “While this may make sense for an individual’s financial situation, do not assume it will automatically improve your credit scores.”

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This article originally ran on CultureMap.

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World's largest student startup competition names teams for 2025 Houston event

ready, set, pitch

The Rice Alliance for Technology and Entrepreneurship has announced the 42 student-led teams worldwide that will compete in the 25th annual Rice Business Plan Competition this spring.

The highly competitive event, known as one of the world’s largest and richest intercollegiate student startup challenges, will take place April 10–12 at Houston's The Ion. Teams in this year's competition represent 34 universities from four countries, including one team from Rice.

Graduate student-led teams from colleges or universities around the world will present their plans before more than 300 angel, venture capital, and corporate investors to compete for more than $1 million in prizes. Last year, top teams were awarded $1.5 million in investment and cash prizes.

The 2025 invitees include:

  • 3rd-i, University of Miami
  • AG3 Labs, Michigan State University
  • Arcticedge Technologies, University of Waterloo
  • Ark Health, University of Chicago
  • Automatic AI, University of Mississippi and University of New Orleans
  • Bobica Bars, Rowan University
  • Carbon Salary, Washington University in St. Louis
  • Carmine Minerals, California State University, San Bernardino
  • Celal-Mex, Monterrey Institute of Technology and Higher Education
  • CELLECT Laboratories, University of Waterloo
  • ECHO Solutions, University of Houston
  • EDUrain, University of Missouri-St. Louis
  • Eutrobac, University of California, Santa Cruz
  • FarmSmart.ai, Louisiana State University
  • Fetal Therapy Technologies, Johns Hopkins University
  • GreenLIB Materials, University of Ottawa
  • Humimic Biosystems, University of Arkansas
  • HydroHaul, Harvard University
  • Intero Biosystems, University of Michigan
  • Interplay, University of Missouri-Kansas City
  • MabLab, Harvard University
  • Microvitality, Tufts University
  • Mito Robotics, Carnegie Mellon University
  • Motmot, Michigan State University
  • Mud Rat, University of Connecticut
  • Nanoborne, University of Texas at Austin
  • NerView Surgical, McMaster University
  • NeuroFore, Washington University in St. Louis
  • Novus, Stanford University
  • OAQ, University of Toronto
  • Parthian Baattery Solutions, Columbia University
  • Pattern Materials, Rice University
  • Photon Queue, University of Illinois, Urbana-Champaign
  • re.solution, RWTH Aachen University
  • Rise Media, Yale University
  • Rivulet, University of Cambridge and Dartmouth College
  • Sabana, Carnegie Mellon University
  • SearchOwl, Case Western Reserve University
  • Six Carbons, Indiana University
  • Songscription, Stanford University
  • Watermarked.ai, University of Illinois, Urbana-Champaign
  • Xatoms, University of Toronto

This year's group joins more than 868 RBPC alums that have raised more than $6.1 billion in capital with 59 successful exits, according to the Rice Alliance.

Last year, Harvard's MesaQuantum, which was developing accurate and precise chip-scale clocks, took home the biggest sum of $335,000. While not named as a finalist, the team secured the most funding across a few prizes.

Protein Pints, a high-protein, low-sugar ice cream product from Michigan State University, won first place and the $150,000 GOOSE Capital Investment Grand Prize, as well as other prizes, bringing its total to $251,000.

Tesla recalling more than 375,000 vehicles due to power steering issue

Tesla Talk

Tesla is recalling more than 375,000 vehicles due to a power steering issue.

The recall is for certain 2023 Model 3 and Model Y vehicles operating software prior to 2023.38.4, according to the National Highway Traffic Safety Administration.

The printed circuit board for the electronic power steering assist may become overstressed, causing a loss of power steering assist when the vehicle reaches a stop and then accelerates again, the agency said.

The loss of power could required more effort to control the car by drivers, particularly at low speeds, increasing the risk of a crash.

Tesla isn't aware of any crashes, injuries, or deaths related to the condition.

The electric vehicle maker headed by Elon Musk has released a free software update to address the issue.

Letters are expected to be sent to vehicle owners on March 25. Owners may contact Tesla customer service at 1-877-798-3752 or the NHTSA at 1-888-327-4236.

Houston space tech companies land $25 million from Texas commission

Out Of This World

Two Houston aerospace companies have collectively received $25 million in grants from the Texas Space Commission.

Starlab Space picked up a $15 million grant, and Intuitive Machines gained a $10 million grant, according to a Space Commission news release.

Starlab Space says the money will help it develop the Systems Integration Lab in Webster, which will feature two components — the main lab and a software verification facility. The integration lab will aid creation of Starlab’s commercial space station.

“To ensure the success of our future space missions, we are starting with state-of-the-art testing facilities that will include the closest approximation to the flight environment as possible and allow us to verify requirements and validate the design of the Starlab space station,” Starlab CEO Tim Kopra said in a news release.

Starlab’s grant comes on top of a $217.5 million award from NASA to help eventually transition activity from the soon-to-be-retired International Space Station to new commercial destinations.

Intuitive Machines is a space exploration, infrastructure and services company. Among its projects are a lunar lander designed to land on the moon and a lunar rover designed for astronauts to travel on the moon’s surface.

The grants come from the Space Commission’s Space Exploration and Aeronautics Research Fund, which recently awarded $47.7 million to Texas companies.

Other recipients were:

  • Cedar Park-based Firefly Aerospace, which received $8.2 million
  • Brownsville-based Space Exploration Technologies (SpaceX), which received $7.5 million
  • Van Horn-based Blue Origin, which received $7 million

Gwen Griffin, chair of the commission, says the grants “will support Texas companies as we grow commercial, military, and civil aerospace activity across the state.”

State lawmakers established the commission in 2023, along with the Texas Aerospace Research & Space Economy Consortium, to bolster the state’s space industry.