Tag: consumer credit education

"Out with the old and in with the new" is often used when talking about a fresh start or change we make in life, such as getting a new job, breaking bad habits or making room in our closets for a new wardrobe. But the saying doesn't exactly hold true in terms of business growth. While acquiring new customers is critical, increasing customer retention rates by just 5% can increase profits by up to 95%.1 So, what can your organization do to improve customer retention? Here are three quick tips: Stay informed Keeping up with your customers’ changing interests, behaviors and life events enables you to identify retention opportunities and create personalized credit marketing campaigns. Are they new homeowners? Or likely to purchase a vehicle within the next five months? With a comprehensive consumer database, like Experian’s ConsumerView®, you can gain granular insights into who your customers are, what they do and even what they will potentially do. To further stay informed, you can also leverage Retention TriggersSM, which alert you of your customers changing credit needs, including when they shop for new credit, open a new trade or list their property. This way, you can respond with immediate and relevant retention offers. Be more than a business – be human Gen Z's spending power is projected to reach $12 trillion by 2030, and with 67% looking for a trusted source of personal finance information,2 financial institutions have an opportunity to build lifetime loyalty now by serving as their trusted financial partners and advisors. To do this, you can offer credit education tools and programs that empower your Gen Z customers to make smarter financial decisions. By providing them with educational resources, your younger customers will learn how to strengthen their financial profiles while continuing to trust and lean on your organization for their credit needs. Think outside the mailbox While direct mail is still an effective way to reach consumers, forward-thinking lenders are now also meeting their customers online. To ensure you’re getting in front of your customers where they spend most of their time, consider leveraging digital channels, such as email or mobile applications, when presenting and re-presenting credit offers. This is important as companies with omnichannel customer engagement strategies retain on average 89% of their customers compared to 33% of retention rates for companies with weak omnichannel strategies. Importance of customer retention Rather than centering most of your growth initiatives around customer acquisition, your organization should focus on holding on to your most profitable customers. To learn more about how your organization can develop an effective customer retention strategy, explore our marketing solutions. Increase customer retention today 1How investing in cardholder retention drives portfolio growth, Visa. 2Experian survey, 2023.

There's no magic solution to undoing the decades of policies and prejudices that have kept certain communities unable to fully access our financial and credit systems. But you can take steps to address previous wrongs, increase financial inclusion and help underserved communities. If you want to engage consumers and keep them engaged, you could start with the following four areas of focus. 1. Find ways to build trust Historical practices and continued discriminatory behavior have created justifiable distrust of financial institutions among some consumers. In February 2022, Experian surveyed more than 1,000 consumers to better understand the needs and barriers of underserved communities. The respondents came from varying incomes, ethnicity and age ranges. Fewer than half of all the consumers (47 percent) said they trusted their bank's personal finance advice and information, and that dropped to 41 percent among Black Americans. In a follow-up webinar discussion of financial growth opportunities that benefitted underserved communities, we found that many financial institutions saw a connection between their financial inclusion efforts and building trust with customers and communities. Here is a sample question and a breakdown of the primary responses: What do you think is the greatest business advantage of executing financial inclusion in your financial institution or business?1 Building trust and retention with customers and communities (78%) Increasing revenue by expanding to new markets (6%) Enhancing our brand and commitment to DEI (14%) Staying in alignment with regulator and compliance guidelines (2%) Organizations may want to approach financial inclusion in different ways depending on their unique histories and communities. But setting quantifiable goals and creating a roadmap for your efforts is a good place to start. 2. Highlight data privacy and mobile access If you want to win over new customers, you'll need to address their most pressing needs and desires. Consumers' top four considerations when signing up for a new account were consistent, but the specific results varied by race. Keep this in mind as you consider messaging around the security and privacy measures. Also, consider how underserved communities might access your online services. Having an accessible and intuitive mobile app or mobile-friendly website is important and likely carries even more weight with these groups. According to the Pew Research Center, as of 2021, around a quarter of Hispanic/Latino and 17% of Black Americans are smartphone-dependent — meaning they have a smartphone but don't have broadband access at home. Low-income and minority communities are also less likely to live near bank branches or ATMs. 3. Offer lower rates and fees Low rates and fees are also a top priority across the board — everyone likes to save money. However, fewer Black and Hispanic households have $1,000 in savings or more compared to white households, which could make additional savings opportunities especially important. There have been several recent examples of large banks and credit unions eliminating overdraft fees. And the Bank On National Account Standards can be a helpful framework if you offer demand deposit accounts. Lowering interest rates on credit products can be more challenging, particularly when consumers don't have a thick (or any) credit file. But by integrating expanded FCRA-regulated data sources and new scoring models, such as Experian's Lift PremiumTM, creditors can score more applicants and potentially offer them more favorable terms. 4. Leverage credit education tools and messaging For consumers who've had negative credit experiences, are new to credit, or are recent immigrants with little understanding of the U.S. credit system, building and using credit can feel daunting. About 80% of women have little or no confidence in getting approved for credit or worry that applying could hurt them further. Only 20% of consumers who make less than $35,000 a year say they're "extremely" or "very" confident they'll be approved for credit. While most consumers haven't used credit education tools before, they're willing to try. More than 60 percent of Black and Hispanic respondents said they're likely to sign up for free credit education tools and resources from their banks. Offering these tools could be an opportunity to strengthen trust and help consumers build credit, which can also make it easier for them to qualify for financial products and services in the future. Moving forward with financial inclusion Broadening access to credit can be an important part of financial inclusion, and financial institutions can grow by expanding outreach to underserved communities. However, the relationship must be built on trust, security, and offerings that meet these consumers' needs. Through our Inclusion Forward™ initiative, Experian can support your financial inclusion goals — helping you empower underserved communities by helping them grow their financial futures. Learn more about Experian financial inclusion solutions and financial inclusion tools.

From awarding bonus points on food delivery purchases to incorporating social media into their marketing efforts, credit card issuers have leveled up their acquisition strategies to attract and resonate with today’s consumers. But as appealing as these rewards may seem, many consumers are choosing not to own a credit card because of their inability to qualify for one. As card issuers go head-to-head in the battle to reach and connect with new consumers, they must implement more inclusive lending strategies to not only extend credit to underserved communities, but also grow their customer base. Here’s how card issuers can stay ahead: Reach: Look beyond the traditional credit scoring system With limited or no credit history, credit invisibles are often overlooked by lenders who rely solely on traditional credit information to determine applicants’ creditworthiness. This makes it difficult for credit invisibles to obtain financial products and services such as a credit card. However, not all credit invisibles are high-risk consumers and not every activity that could demonstrate their financial stability is captured by traditional data and scores. To better evaluate an applicant’s creditworthiness, lenders can leverage expanded data sources, such as an individual’s cash flow or bank account activity, as an additional lens into their financial health. With deeper insights into consumers’ banking behaviors, card issuers can more accurately assess their ability to pay and help historically disadvantaged populations increase their chances of approval. Not only will this empower underserved consumers to achieve their financial goals, but it provides card issuers with an opportunity to expand their customer base and improve profitability. Connect: Become a financial educator and advocate Credit card issuers looking to build lifelong relationships with new-to-credit consumers can do so by becoming their financial educator and mentor. Many new-to-credit consumers, such as Generation Z, are anxious about their finances but are interested in becoming financially literate. To help increase their credit understanding, card issuers can provide consumers with credit education tools and resources, such as infographics or ‘how-to’ guides, in their marketing campaigns. By learning about the basics and importance of credit, including what a credit score is and how to improve it, consumers can make smarter financial decisions, boost their creditworthiness, and stay loyal to the brand as they navigate their financial journeys. Accessing credit is a huge obstacle for consumers with limited or no credit history, but it doesn’t have to be. By leveraging expanded data sources and offering credit education to consumers, credit card issuers can approve more creditworthy applicants and unlock barriers to financial well-being. Visit us to learn about how Experian is helping businesses grow their portfolios and drive financial inclusion. Visit us

Millions of consumers are excluded from the credit economy, whether it’s because they have limited credit history, dated information within their credit file, or are a part of a historically disadvantaged group. Without credit, it can be difficult for consumers to access the tools and services they need to achieve their financial goals. This February, Experian surveyed over 1,000 consumers across census demographics, including income, ethnicity, and age, to understand the perceptions, needs, and barriers underserved communities face along their credit journey. Our research found that: 75% of consumers with an average household income of less than $50,000 have less than $1,000 in savings. 1 in 5 consumers with an average household income of less than $35,000 say they’re confident in getting approved for credit. 80% of respondents who are not or slightly confident in getting approved for credit were women. When asked why they believed they would not get approved for credit, participants shared common responses, such as having poor payment history, a low credit score, and insufficient income. Given these findings, what can lenders provide to help underserved consumers strengthen their financial profiles and gain access to the credit they need and deserve? The power of credit education While only 20% of respondents were familiar with credit education tools, the majority expressed interest in these offerings. With Experian, lenders can develop and implement credit education programs, tools, and solutions to help consumers understand their credit and the impact certain choices can have on their credit scores. From interactive tools like Score Simulator and Score Planner to real-time alerts from Credit Monitoring, consumers can actively assess their financial health, take steps to improve their creditworthiness, and ultimately become better candidates for credit offers. In turn, consumers can feel more confident and empowered to achieve their financial goals. Credit education tools not only help consumers increase their credit literacy, confidence, and chances of approval, but they also create opportunities for lenders to build lasting customer relationships.  Consumers recognize that healthy credit plays an important role in their financial lives, and by helping them navigate the credit landscape, lenders can increase engagement, build loyalty, and enhance their brand’s reputation as an organization that cares about their customers. Empowering consumers with credit education is also a way for lenders to unlock new revenue streams. By learning to borrow, save, and spend responsibly, consumers can improve their creditworthiness and be in a better position to accept extended credit offerings, driving more cross-sell and upsell opportunities for lenders. More ways experian can help Experian is deeply committed to helping marginalized and low-income communities access the financial resources they need. In addition to our credit education tools, here are a few of our other offerings: Our expanded data helps lenders make better lending decisions by providing greater visibility and transparency around a consumer’s inquiry and payment behaviors. With a holistic view of their current and prospective customers, lenders can more accurately identify creditworthy applicants, uncover new growth opportunities, and expand access to credit for underserved consumers. Experian GoTM is a free, first-of-its-kind program to help credit invisibles and those with limited credit histories begin building credit on their own terms. After authenticating their identities and obtaining an Experian credit report, users will receive ongoing education about how credit works and recommendations to further build their credit history. To learn more about building profitable customer relationships with credit education, check out our credit education solutions and watch our Three Ways to Uncover Financial Growth Opportunities that Benefit Underserved Communities webinar. Learn more Watch webinar

Originally posted by Experian Global News blog At Experian, we have an unwavering commitment to helping consumers and clients manage through this unprecedented period. We are actively working with consumers, lenders, lawmakers and regulators to help mitigate the potential impact on credit scores during times of financial hardship. In response to the urgent and rapid changes associated with COVID-19, we are accelerating and enhancing our financial education programming to help consumers maintain good credit and gain access to the financial services they need. This is in addition to processes and tools the industry has in place to help lenders accommodate situations where consumers are affected by circumstances beyond their control. These processes will be extended to those experiencing financial hardship as a result of COVID-19. As the Consumer’s Credit Bureau, our commitment at Experian is to inform, guide and protect our consumers and customers during uncertain times. With expected delays in bill payments, unprecedented layoffs, hiring freezes and related hardships, we are here to help consumers in understanding how the credit reporting system and personal finance overall will move forward in this landscape. One way we’re doing this is inviting everyone to join our special eight-week series of #CreditChat conversations surrounding COVID-19 on Wednesdays at 3 p.m. ET on Twitter. Our weekly #CreditChat program started in 2012 to help the community learn about credit and important personal finance topics (e.g. saving money, paying down debt, improving credit scores). The next several #CreditChats will be dedicated to discussing ways to manage finances and credit during the pandemic. Topics of these #CreditChats will include methods and strategies for bill repayment, paying down debt, emergency financial assistance and preparing for retirement during COVID-19. “As the consumer’s credit bureau, we are committed to working with consumers, lenders and the financial community during and following the impacts of COVID-19,” says Craig Boundy, Chief Executive Officer of Experian North America. “As part of our nation’s new reality, we are planning for options to help mitigate the potential impact on credit scores due to financial hardships seen nationwide. Our #CreditChat series and supporting resources serve as one of several informational touchpoints with consumers moving forward.” Being fully committed to helping consumers and lenders during this unprecedented period, we’ve created a dedicated blog page, “COVID-19 and Your Credit Report,” with ongoing and updated information on how COVID-19 may impact consumers’ creditworthiness and – ultimately – what people should do to preserve it. The blog will be updated with relevant news as we announce new solutions and tactics. Additionally, our “Ask Experian” blog invites consumers to explore immediate and evolving resources on our COVID-19 Updates page. In addition to this guidance, and with consumer confidence in the economy expected to decline, we will be listening closely to the expert voices in our Consumer Council, a group of leaders from organizations committed to helping consumers on their financial journey. We established a Consumer Council in 2009 to strengthen our relationships and to initiate a dialogue among Experian and consumer advocacy groups, industry experts, academics and other key stakeholders. This is in addition to ongoing collaboration with our regulators. Additionally, our Experian Education Ambassador program enables hundreds of employee volunteers to serve as ambassadors sharing helpful information with consumers, community groups and others. The goal is to help the communities we serve across North America, providing the knowledge consumers need to better manage their credit, protect themselves from fraud and identity theft and lead more successful, financially healthy lives. COVID-19 has impacted all industries and individuals from all walks of life. We want our community to know we are right there with you. Learn more about our weekly #CreditChat and upcoming schedule here. Learn more

Consumer credit scores A recent survey* released by the Consumer Federation of America and VantageScore Solutions, LLC, shows that potential borrowers are more likely to have obtained their credit score than nonborrowers. 70% of those intending to take out a consumer or mortgage loan in the next year received their credit score in the past year, compared with 57% of those not planning to borrow. Consumers who obtained at least one credit score in the past year were more likely to say their knowledge of scores is good or excellent compared with those who haven’t (68% versus 45%). While progress is being made, there’s still a lot of room for improvement. By educating consumers, lenders can strengthen consumer relationships and reduce loss rates. It’s a win-win for consumers and financial institutions. Credit education for your customers>

In 2017, a meaningful jump in consumer sentiment bolstered spending, and caused the spread between disposable personal income and consumer spending to reach an all-time high. This increase in spread was mostly financed through consumer debt, which according to the Federal Reserve Bank of New York has brought total consumer debt to a new peak of $12.8 Trillion surpassing the prior peak in 2008. The Experian eighth annual State of Credit report greatly supported the consumer behavior trends observed for the past year. Spanning the generations  It is no surprise that generation Z (the “Great Recession Generation”) is conservative and prudent in their approach to credit because they are the most familiar with the post financial crisis economy. Results showed Millennials experienced a drop in overall debt, and an increase in mortgage debt reflects the national homeownership affordability challenge facing this generation. As first time homebuyers, millennials have to relatively tighten their spending as they dedicate an ever-growing portion of their income to housing. On the other end of the spectrum, the results of the study showed that Baby Boomers’ had sizable debt (including mortgage debt), which reflects the generation’s intent to stay active in their communities and in their homes much longer than prior generations have done. A recent Harvard study reported that by 2035, one out of three American households will be headed by an individual 65 years of age or older, compared to current ratio of one out of five households. What’s on the horizon? It is reasonable to assume that these trends may continue into 2018, as the underlying conditions continue to persist. A closer eye should be kept on student and auto loans due to the significant increase in portfolio size and increasing default rates compare to other debt.   Editor’s note: This post was written by Fadel N. Lawandy, Director of the C. Larry Hoag Center for Real Estate and Finance and the Janes Financial Center at the George L. Argyros School of Business and Economics, Chapman University. Fadel joined the George L. Argyors School of Business and Economics, Chapman University after retiring as a Portfolio Manager from Morgan Stanly Smith Barney in 2009. He has two decades of experience in the financial industry with banking, credit management, commercial/residential real estate acquisition and financing, corporate finance, mergers and acquisitions, quantitative and qualitative analysis and research, and portfolio management. Fadel currently serves as the Chairman of the Board and President of CFA Society Orange County, and is an active member of the CFA Institute.

A recent Experian study found student loans have increased by 84% since the recession (from 2008 to 2014), surpassing credit card debt, home-equity loans and lines of credit, and automotive debt.