Beyond FICO: Exploring Alternative Credit Underwriting Practices That Expand Financial Access in Rural, Low-to-Moderate Income Communities

Date of Award

5-9-2026

Degree Name

Ed.D. in Leadership for Organizations

Department

Department of Educational Administration

Advisor/Chair

Elizabeth Essex

Abstract

Traditional credit scoring systems, particularly those centered on FICO scores, have long served as the primary mechanism used by financial institutions for evaluating borrower risk. While effective for standardization and efficiency, these models systematically exclude large segments of the population, especially individuals in rural and low to moderate-income communities who lack traditional credit histories (no credit score) or whose past financial disruptions no longer reflect current repayment capacity (low credit score). As a result, otherwise creditworthy borrowers are frequently denied access to affordable credit, reinforcing cycles of financial exclusion. Credit unions, as mission-driven, community-focused financial institutions, are uniquely positioned to address this gap by adopting alternative credit underwriting practices. This Dissertation in Practice employed a mixed-methods action research design to explore how alternative credit underwriting practices can expand access to credit for underserved populations while maintaining sound risk management. The research was conducted at a community-based credit union serving predominantly rural and low to moderate-income members and examined both the lived experiences of lending practitioners and the empirical performance of a seasoned loan portfolio. Qualitative data were collected through a semi-structured focus group with lending staff and leadership to understand how alternative underwriting is conceptualized, operationalized, and constrained in practice. Thematic analysis revealed that alternative credit underwriting was consistently defined as relationship lending, emphasizing contextual understanding, borrower character, and solution-oriented decision making. Participants identified institutional barriers, regulatory tensions, and cultural resistance as key challenges, while also articulating strategies to mitigate risk through relationship depth, compensating factors, and ongoing member engagement. Quantitative analysis examined loan performance data from 2020 through 2023, focusing on subprime borrowers and comparing outcomes by relationship depth, income status, and credit score. Statistical testing demonstrated that established member relationships were significantly associated with improved repayment outcomes, even when controlling traditional risk variables. Notably, income status alone was not a strong predictor of default, reinforcing the value of relationship-based indicators over credit score-centric models. Findings from both data strands converged to support the conclusion that alternative credit underwriting practices can expand access to credit without compromising portfolio performance when implemented intentionally and supported by organizational structures. The study culminates in an actionable framework for credit unions seeking to formalize relationship-based underwriting, integrate character assessment into policy, and balance financial inclusion with institutional sustainability. These findings contribute practical guidance for practitioners and extend the literature on inclusive lending by demonstrating that financial inclusion and prudent risk management are not competing objectives but mutually reinforcing outcomes.

Keywords

Banking, Finance

Comments

OCLC No. 1591628120

Rights Statement

Copyright 2026, author.

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