Tag: consumer credit scores

Recent statistics certainly illustrate why many renters are feeling anxious lately. More than 40% of renter households in the U.S. — that’s 19 million households — spent more than 30% of their total income on housing costs during the 2017–2021 period, according to the U.S. Census Bureau’s new American Community Survey (ACS). Households that spend more than 30% of their income on housing costs — including rent or mortgage payments, utilities, and other fees — are considered “housing cost burdened” by the U.S. Department of Housing and Urban Development. Digging a little deeper, nearly 8% of the nation’s 3,143 counties had a median housing cost ratio for renters above 30% during the five-year period, according to ACS, and nearly a third of all U.S. renters lived in these counties. Unsurprisingly, 60% of Americans say they’re “very concerned” about the cost of housing, according to the Pew Research Center. The financial plight of renters today underscores the importance of incorporating renter payment history into screening efforts. It also indicates why reporting positive rent payments to credit bureaus can be such a powerful amenity. Rental data: The key to optimizing the screening process Simply put, a screening process that includes an applicant’s rental payment history provides a more comprehensive understanding of their risk profile and likelihood of paying rent on time and in full. That’s especially critical in an environment when paying rent can be something of a financial burden for many. Wouldn’t an apartment manager want to make a leasing decision by taking into consideration every possible bit of relevant data, especially the most relevant data available — rental payment history? Credit scores are often at the heart of an operator’s screening process. A credit score can give a very general sense of the risk posed by a prospect, but it doesn't provide crystal-clear insight into the likelihood of an applicant paying their rent on time and in full. Even people who are financially responsible and diligent about paying their rent can find themselves with less-than-ideal credit scores. Maybe they were injured in an accident, came down with a serious illness or lost their job, and then suffered a host of financial consequences that harmed their credit score. It can't be assumed people who have been through these situations won't pay their rent on time. At the same time, especially given the burden rent payments pose for many renters, reporting positive payments to credit bureaus can serve as an effective way to attract residents. Unfortunately, unlike homeowners, apartment residents traditionally have not seen a positive impact on their credit reports for making their rent payments on time and in full, even though these payments can very large and usually make up their largest monthly expense. Rental reporting According to the Credit Builders Alliance (CBA), renters are seven times more likely to be credit invisible — meaning they lack enough credit history to generate a credit score — when compared to homeowners. But by reporting their on-time rent payments to credit bureaus, apartment communities can help renters build their credit histories, which can make it easier for them to do things such as secure a car loan or credit card — and to do so at favorable interest rates. Additionally, rent reporting gives residents a strong incentive to pay their rent on time and in full. And it can provide apartment communities with a competitive advantage since this financial amenity is not widespread throughout the rental-housing industry. The data is clear: this is a challenging time for many renters. But by making rental payment histories part of their screening, operators can minimize their risk. And by reporting positive rental payments, they can attract residents and help them build a better financial future. To learn more about Experian’s largest rental payment database and how to start reporting with us, visit us online. Experian RentBureau™

Even before the COVID-19 pandemic, many Americans lacked equal access to financial products and services — from tapping into affordable banking services to credit cards to financing a home purchase. The global pandemic likely exacerbated those existing issues and inequalities. That reality makes financial inclusion — a concerted effort to make financial products and services affordable and accessible to all consumers — more crucial than ever. The playing field wasn't level before the pandemic The Federal Reserve reported that in 2019, Black and Hispanic/Latino families had median wealth that was just 13 to 19 percent of that of White families — $24,100 and $36,100, respectively, compared to $188,200 for White families. That inequity is also reflected in credit score disparities. While credit scores, income, and wealth aren't synonymous, the traditional credit scoring system leads marginalized communities to be disproportionately labeled unscoreable or credit invisible, and face challenges in accessing credit. New research from Experian shows that in over 200 cities, there can be more than a 100-point difference in credit scores between neighborhoods — often within just a few miles from each other. Marginalized communities bore the financial brunt Minority communities were also disproportionately impacted by COVID-19 in terms of infections, job losses, and financial hardship. In mid-2020, the Economic Policy Institute (EPI) reported Black and Hispanic/Latino workers were more likely than White workers to have lost their jobs or to be classified as essential workers — leading to economic or health insecurity. Government initiatives — including the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) and the American Rescue Plan — created expanded unemployment benefits, paused loan payments, eviction moratoriums, and direct cash payments. These helped consumers' immediate financial well-being. The National Bureau of Economic Research found that, on average, U.S. households spent approximately 40 percent of their first two stimulus checks, with about 30 percent used for savings and another 30 percent used to pay down debt. In some communities highly affected by COVID-19, consumers were able to pay down nearly 40 percent of their credit card balances and close more than 9 percent of their bank card accounts, according to recent data. Stimulus payments have been credited with reducing childhood poverty and helping families save for financial emergencies. That being said, people on the upper end of the income scale were able to improve their financial situation even more. Their wealth grew at a much faster pace than people at the bottom end of the income distribution scale, according to data from the Federal Reserve. How the pandemic deepened financial exclusion Although hiring has picked up in low-wage industries, research indicates that low-wage jobs have been the slowest to return. According to a survey by the Pew Research Center, among respondents who said their financial situation worsened during the pandemic, 44 percent believe it will take three years or more to get back to where they were a year ago. About 10 percent don't think their finances will ever recover. Recent Experian data shows that consumers in certain communities that were already struggling to pay their debts fell into an even bigger hole. These consumers missed payments on 56 percent more accounts in the period between spring 2019 to spring 2020 compared to the year prior. Credit scores in these neighborhoods fell by an average of over 20 points during the first 18 months of COVID-19. That being said, U.S. consumers overall increased their median credit scores by an average of 21 points from the end of 2019 to the end of 2021. When consumers with deteriorating credit encounter financial stresses, often their only recourse is to pile on additional debt. Even worse, those who can't access traditional credit often turn to alternative credit arrangements, such as short-term loans, which may charge significantly higher interest rates. READ MORE: More Than a Score: The Case for Financial Inclusion What can the financial sector do? Without access to affordable financial services and products, subprime or credit invisible consumers may not get approved for a mortgage or car loan — things that might come much easier for consumers with better scores. This is just one reason why financial inclusion is so important — and why financial services companies have a big role to play in driving it. One place to start is by taking a broader view of what makes a creditworthy consumer. In addition to traditional credit scoring models, new tools can leverage artificial intelligence and machine learning, along with alternative data, to analyze the creditworthiness of consumers. By qualifying for credit, more consumers can access affordable mortgages, car loans, business loans and insurance - freeing up money for other expenses and allowing them to grow their wealth.. READ MORE: What Is Alternative and Non-Traditional Data? Last word Marginalized communities were already struggling economically before the pandemic, and the impact of COVID-19 has made the wealth disparities worse. With the pandemic waning, now is the time for financial institutions to take action on financial inclusion. Not only does it help improve your customers' lives and make them better prepared for the next crisis, but it also fuels your business's growth and bottom line.

Credit scores play a massive role in a consumer’s financial life as they help determine an individual’s creditworthiness. While 62% of consumers are interested in improving their credit scores, a troublingly high percentage are unsure of where to start. What’s more, one in four Americans have no idea how credit scores are even determined. This knowledge gap presents an opportunity for financial institutions to help consumers increase their credit understanding and establish lasting relationships. Some of the benefits of providing credit education to consumers include: Consumer trust and loyalty Today’s consumers are looking for guidance and support on all things credit. Helping consumers navigate their credit reports, improve their credit scores and explore the impacts of various scenarios are all opportunities for financial institutions to meet this demand and foster loyalty. With the knowledge and tools needed to make confident and responsible financial decisions, consumers will continue to trust and look toward the same financial institutions for credit guidance as they navigate their financial journeys. Credit education is especially valuable to younger consumers. As rookies to the credit game, many Gen Zers may find credit to be mysterious, complex and difficult to grasp. Despite these feelings, Gen Zers have shown considerable interest in becoming financially literate. By continuously providing Gen Z consumers with reliable and accessible credit education early on, financial institutions can grow to become their valuable partner, educator and mentor for life. More cross-sell opportunities The more educational resources financial institutions provide their consumers, the more likely they are to pay their credit card bills on time, take out loans and mortgages they can meet and purchase within their buying power, making them prime candidates to approach for additional credit offerings. According to studies conducted by Visa Performance Solutions, consumers respond more to credit offers from institutions they currently have a relationship with than those they don’t. By providing credit education and relevant offers to existing customers, financial institutions can improve satisfaction while increasing their revenue. Enhances brand reputation While credit education allows financial institutions to strengthen their relationships with existing clients, it also gives them an opportunity to expand and acquire new ones. When consumers feel valued and cared for, they are more likely to recommend a business’s products and services to someone else. The more consumers see how much a financial institution invests in their customers’ financial well-being, the more likely they are to convert themselves. Ready to get started? Providing value to consumers is no longer just about offering great products and services; it’s about helping them understand the basics and importance of credit so that achieving their financial goals comes easily. To learn more about how credit education can help deepen customer relationships and drive business growth, visit our Experian Partners Solutions page. Learn more

No two customers are the same. That’s why it’s important to go beyond the traditional credit score for a closer look at each consumer’s individual circumstance and create personalized response plans. Learn more about some of the many different customers you’ll encounter and download our guide to get recommendations for every stage of the lifecycle. Get the Guide

When running a credit report on a new applicant, you must ensure Fair Credit Reporting Act (FCRA) compliance before accessing, using and sharing the collected data. The Coronavirus Aid, Relief, and Economic Security (CARES) Act has impacted credit reporting under the FCRA, as has new guidance from the Consumer Financial Protection Bureau (CFPB). Recent updates include: The CARES Act amended the FCRA to require furnishers who agree to an “accommodation,”1 to report the account as current, although it is permitted to continue to report the account as delinquent if the account was delinquent before the accommodation was made. Although not legally obligated, data furnishers should continue furnishing information to the credit reporting agencies (CRAs) during the COVID-19 crisis, and make sure that information reported is complete and accurate. Below is a brief FCRA-related compliance overview2 covering various FCRA requirements3 when requesting and using consumer credit reports for an extension of credit permissible purpose. For more information regarding your responsibilities under the FCRA as a user of consumer reports, please consult your Legal Counsel and the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA handbook located on our website. Before obtaining a consumer report you have…  Reviewed your federal and state regulations and laws related to consumer reports, scores, decisions, etc.  Made sure you have a valid permissible purpose for pulling the consumer report.  Certified compliance to the CRA from which you are getting the consumer report. You have certified that you complied with all the federal and state requirements. After you take an adverse action based on a consumer report you… Provide the consumer with an oral, written or electronic notice of the adverse action. Provide written or electronic disclosure of the numerical credit score used to take the adverse action, or when providing a “risk-based pricing” notice. Provide the consumer with an oral, written or electronic notice, which includes the below information:  Name, address and telephone number of CRA that supplied the report, if nationwide. A statement that the CRA did not make the adverse decision and therefore can’t explain why the decision was made.  Notice of the consumer’s right to a free copy of their report from the CRA, if requested within 60 days.  Notice of the consumer’s right to dispute with the CRA the accuracy or completeness of any information in a consumer report provided by the CRA. Provide the consumer with a “risk-based pricing” notice if credit was granted but on less favorable terms based on information in their consumer report. We understand how challenging it is to understand and meet all your obligations as a data furnisher – we’re here to make it a little easier. Click below to speak with a representative and gain more insight on how the CARES Act impacts FCRA reporting. Download overview Speak with a representative 1An “accommodation” is defined as “an agreement to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief” granted to a consumer affected by COVID-19 during the covered period. 2This FCRA overview is not legal guidance and does not enumerate all your requirements under the FCRA as a user of consumer reports. Additionally, this FCRA Overview is not intended to provide legal advice or counsel you regarding your obligations under the FCRA or any other federal or state law or regulation. Should you have any questions about your institution’s specific obligations under the FCRA or any other federal or state law or regulation, you should consult with your Legal Counsel. 3This FCRA overview is intended to be used solely by financial service providers when extending credit to consumers and does not include all FCRA regulatory obligations. You are responsible for regulatory compliance when requesting and using consumer reports, which includes adhering to all applicable federal and state statutes and regulations and ensuring that you have the correct policies and procedures in place.

With new legislation, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act impacting how data furnishers will report accounts, and government relief programs offering payment flexibility, data reporting under the coronavirus (COVID-19) outbreak can be complicated. Especially when it comes to small businesses, many of which are facing sharp declines in consumer demand and an increased need for capital. As part of our recently launched Q&A perspective series, Greg Carmean, Experian’s Director of Product Management and Matt Shubert, Director of Data Science and Modelling, provided insight on how data furnishers can help support small businesses amidst the pandemic while complying with recent regulations. Check out what they had to say: Q: How can data reporters best respond to the COVID-19 global pandemic? GC: Data reporters should make every effort to continue reporting their trade experiences, as losing visibility into account performance could lead to unintended consequences. For small businesses that have been negatively affected by the pandemic, we advise that when providing forbearance, deferrals be reported as “current”, meaning they should not adversely impact the credit scores of those small business accounts. We also recommend that our data reporters stay in close contact with their legal counsel to ensure they follow CARES Act guidelines. Q: How can financial institutions help small businesses during this time? GC: The most critical thing financial institutions can do is ensure that small businesses continue to have access to the capital they need. Financial institutions can help small businesses through deferral of payments on existing loans for businesses that have been most heavily impacted by the COVID-19 crisis. Small Business Administration (SBA) lenders can also help small businesses take advantage of government relief programs, like the Payment Protection Program (PPP), available through the CARES Act that provides forgiveness on up to 75% of payroll expenses and 25% of other qualifying expenses. Q: How do financial institutions maintain data accuracy while also protecting consumers and small businesses who may be undergoing financial stress at this time? GC: Following bureau recommendations regarding data reporting will be critical to ensure that businesses are being treated fairly and that the tools lenders depend on continue to provide value. The COVID-19 crisis also provides a great opportunity for lenders to educate their small business customers on their business credit. Experian has made free business credit reports available to every business across the country to help small business owners ensure the information lenders are using in their credit decisioning is up-to-date and accurate. Q: What is the smartest next play for financial institutions? GC: Experian has several resources that lenders can leverage, including Experian’s COVID-19 Business Risk Index which identifies the industries and geographies that have been most impacted by the COVID crisis. We also have scores and alerts that can help financial institutions gain greater insights into how the pandemic may impact their portfolios, especially for accounts with the greatest immediate exposure and need. MS: To help small businesses weather the storm, financial institutions should make it simple and efficient for them to access the loans and credit they need to survive. With cash flow to help bridge the gap or resume normal operations, small businesses can be more effective in their recovery processes and more easily comply with new legislation. Finances offer the support needed to augment currently reduced cash flows and provide the stability needed to be successful when a return to a more normal business environment occurs. At Experian, we’re closely monitoring the updates around the coronavirus outbreak and its widespread impact on both consumers and businesses. We will continue to share industry-leading insights to help data furnishers navigate and successfully respond to the current environment. Learn more About Our Experts Greg Carmean, Director of Product Management, Experian Business Information Services, North America Greg has over 20 years of experience in the information industry specializing in commercial risk management services. In his current role, he is responsible for managing multiple product initiatives including Experian’s Small Business Financial Exchange (SBFE), domestic and international commercial reports and Corporate Linkage. Recently, he managed the development and launch of Experian’s Global Data Network product line, a commercial data environment that provides a single source of up to date international credit and firmographic information from Experian commercial bureaus and Tier 1 partners across the globe. Matt Shubert, Director of Data Science and Modelling, Experian Data Analytics, North America Matt leads Experian’s Commercial Data Sciences Team which consists of a combination of data scientists, data engineers and statistical model developers. The Commercial Data Science Team is responsible for the development of attributes and models in support of Experian’s BIS business unit. Matt’s 15+ years of experience leading data science and model development efforts within some of the largest global financial institutions gives our clients access to a wealth of knowledge to discover the hidden ROI within their own data.  

Article written by Alex Lintner, Experian's Group President of Consumer Information Services and Sandy Anderson, Experian's Senior Vice President of Client and Sales Operations Many consumers are facing financial stress due to unemployment and other hardships related to the COVID-19 pandemic. Not surprisingly, data scientists at Experian are looking into how consumers’ credit scores may be impacted during the COVID-19 national emergency period as financial institutions and credit bureaus follow guidance from financial regulators and law established in Section 4021 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In a nutshell, Experian finds that if consumers contact their lenders and are granted an accommodation, such as a payment holiday or forbearance, and lenders report the accommodation accordingly, consumer scores will not be materially affected negatively. It’s not just Experian’s findings, but also those of the major credit scoring companies, FICO® and VantageScore®. FICO has reported that if a lender provides an accommodation and payments are reported on time consistent with the CARES Act, consumers will not be negatively impacted by late payments related to COVID-19. VantageScore® has also addressed this issue and stated that its models are designed to mitigate the impact of missed payments from COVID-19. At the same time, if as predicted, lenders tighten underwriting standards following 11 consecutive years of economic growth, access to credit for some consumers may be curtailed notwithstanding their score because their ability to repay the loan may be diminished. Regulatory guidance and law provide a robust response Recently, the Federal Reserve, along with the federal and state banking regulators, issued a statement encouraging mortgage servicers to work with struggling homeowners affected by the COVID-19 national emergency by allowing borrowers to defer mortgage payments up to 180-days or longer. The Federal Deposit Insurance Corporation stated that financial institutions should “take prudent steps to assist customers and communities affected by COVID-19.” The Office of the Comptroller of the Currency, which regulates nationally chartered banks, encouraged banks to offer consumers payment accommodations to avoid delinquencies and negative credit bureau reporting. This regulatory guidance was backed by Congress in passing the CARES Act, which requires any payment accommodations to be reported to a credit bureau as “current.” The Consumer Financial Protection Bureau, which has oversight of all financial service providers, reinforced the regulatory obligation in the CARES Act. In a statement, the Bureau said “the continuation of reporting such accurate payment information produces substantial benefits for consumers, users of consumer reports and the economy as a whole.” Moreover, the consumer reporting industry has a history of successful coordination during emergency circumstances, like COVID-19, and we’ve provided the support necessary for lenders to report accurately and consistent with regulatory guidance. For example, when a consumer faces hardship, a lender can add a code that indicates a customer or borrower has been “affected by natural or declared disaster.” If a lender uses this or a similar code, a notification about the disaster or other event will appear in the credit report with the trade line for the customer’s account and will remain on the trade line until the lender removes it. As a result, the presence of the code will not negatively impact the consumer credit score. However, other factors may impact a consumer’s score, such as an increase in a consumer’s utilization of their credit lines, which is a likely scenario during a period of financial stress. Suppression or Deletion of late payments will hurt, not help, credit scores In response to the nationwide impact of COVID-19, some lawmakers have suggested that lenders should not report missed payments or that credit bureaus should delete them. The presumption is that these actions would hold consumers harmless during the crisis caused by this pandemic. However, these good intentions end up having a detrimental impact on the whole credit ecosystem as consumer credit information is no longer accurately reflecting consumers’ specific situation. This makes it difficult for lenders to assess risk and for consumers to obtain appropriately priced credit. Ultimately, the best way to help is a consumer-specific solution, meaning one in which a lender reaches an accommodation with each affected individual, and accurately reflects that person’s unique situation when reporting to credit bureaus. When a consumer misses a payment, the information doesn’t end up on a credit report immediately. Most payments are monthly, so a consumer’s payment history with a financial institution is updated on a similar timeline. If, for example, a lender was required to suppress reporting for three months during the COVID-19 national emergency, the result would be no data flowing onto a credit report for three months. A credit report would therefore show monthly payments and then three months of no updates. The same would be true if a credit reporting agency were required to suppress or delete payment information. The lack of data, due to suppression or deletion, means that lenders would be blinded when making credit decisions, for example to increase a credit limit to an existing customer or to grant a new line of credit to a prospective customer. When faced with a blind spot, and unable to assess the real risk of a consumer’s credit history, the prudential tendency would be to raise the cost of credit, or to decrease the availability of credit, to cover the risk that cannot be measured. This could effectively end granting of credit to new customers, further stifling economic recovery and consumer financial health at a time when it’s needed most. Beyond the direct impact on consumers, suppression or deletion of credit information could directly affect the safety and soundness of the nation’s consumer and small business lending system. With missing data, lenders and their regulators would be flying blind as to the accurate information about a consumer’s risk and could result in unknowingly holding loan portfolios with heightened risk for loss. Too many unexpected losses threaten the balance of the financial system and could further seize credit markets. Experian is committed to helping consumers manage their credit and working with lenders on how best to report consumer-specific solutions. To learn more about what consumers can do to manage credit during the COVID-19 national emergency, we’ve provided resources on our website. For individuals looking to explore options their lenders may offer, we’ve included links to many of the companies and update them continuously. With good public policy and consumer-specific solutions, consumers can continue to build credit and help our economy grow.  

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

Article written by Melanie Smith, Senior Copywriter, Experian Clarity Services, Inc. It’s been almost a decade since the Great Recession in the United States ended, but consumers continue to feel its effects. During the recession, millions of Americans lost their jobs, retirement savings decreased, real estate reduced in value and credit scores plummeted. Consumers that found themselves impacted by the financial crisis often turned to alternative financial services (AFS). Since the end of the recession, customer loyalty and retention has been a focus for lenders, given that there are more options than ever before for AFS borrowers. To determine what this looks like in the current climate, we examined today’s non-prime consumers, what their traditional scores look like and if they are migrating to traditional lending. What are alternative financial services (AFS)? Alternative financial services (AFS) is a term often used to describe the array of financial services offered by providers that operate outside of traditional financial institutions. In contrast to traditional banks and credit unions, alternative service providers often make it easier for consumers to apply and qualify for lines of credit but may charge higher interest rates and fees. More than 50% of new online AFS borrowers were first seen in 2018 To determine customer loyalty and fluidity, we looked extensively at the borrowing behavior of AFS consumers in the online marketplace. We found half of all online borrowers were new to the space as of 2018, which could be happening for a few different reasons. Over the last five years, there has been a growing preference to the online space over storefront. For example, in our trends report from 2018, we found that 17% of new online customers migrated from the storefront single pay channel in 2017, with more than one-third of these borrowers from 2013 and 2014 moving to online overall. There was also an increase in AFS utilization by all generations in 2018. Additionally, customers who used AFS in previous years are now moving towards traditional credit sources. 2017 AFS borrowers are migrating to traditional credit As we examined the borrowing behavior of AFS consumers in relation to customer loyalty, we found less than half of consumers who used AFS in 2017 borrowed from an AFS lender again in 2018. Looking into this further, about 35% applied for a loan but did not move forward with securing the loan and nearly 24% had no AFS activity in 2018. We furthered our research to determine why these consumers dropped off. After analyzing the national credit database to see if any of these consumers were borrowing in the traditional credit space, we found that 34% of 2017 borrowers who had no AFS activity in 2018 used traditional credit services, meaning 7% of 2017 borrowers migrated to traditional lending in 2018. Traditional credit scores of non-prime borrowers are growing After discovering that 7% of 2017 online borrowers used traditional credit services in 2018 instead of AFS, we wanted to find out if there had also been an improvement in their credit scores. Historically, if someone is considered non-prime, they don’t have the same access to traditional credit services as their prime counterparts. A traditional credit score for non-prime consumers is less than 600. Using the VantageScore® credit score, we examined the credit scores of consumers who used and did not use AFS in 2018. We found about 23% of consumers who switched to traditional lending had a near-prime credit score, while only 8% of those who continued in the AFS space were classified as near-prime. Close to 10% of consumers who switched to traditional lending in 2018 were classified in the prime category. Considering it takes much longer to improve a traditional credit rating, it’s likely that some of these borrowers may have been directly impacted by the recession and improved their scores enough to utilize traditional credit sources again. Key takeaways AFS remains a viable option for consumers who do not use traditional credit or have a credit score that doesn’t allow them to utilize traditional credit services. New AFS borrowers continue to appear even though some borrowers from previous years have improved their credit scores enough to migrate to traditional credit services. Customers who are considered non-prime still use AFS, as well as some near-prime and prime customers, which indicates customer loyalty and retention in this space. For more information about customer loyalty and other recently identified trends, download our recent reports. State of Alternative Data 2019 Lending Report

Today is National Fintech Day – a day that recognizes the ever-important role that fintech companies play in revolutionizing the customer experience and altering the financial services landscape. Fintech. The word itself has become synonymous with constant innovation, agile technology structures and being on the cusp of the future of finance. Fintech challengers are disrupting existing financial models by leveraging data, advanced analytics and technology – both inspiring traditional financial institutions in their digital transformation strategies and giving consumers access to a variety of innovative financial products and services. But to us at Experian, National Fintech Day means more than just financial disruption. National Fintech Day represents the partnerships we have carefully fostered with our fintech clients to drive financial inclusion for millions of people around the globe and provide consumers with greater control and more opportunities to access the quality credit they deserve. “We are actively seeking out unresolved problems and creating products and technologies that will help transform the way businesses operate and consumers thrive in our society. But we know we can’t do it alone,” said Experian North American CEO, Craig Boundy in a recent blog article on Experian’s fintech partnerships. “That’s why over the last year, we have built out an entire team of account executives and other support staff that are fully dedicated to developing and supporting partnerships with leading fintech companies. We’ve made significant strides that will help us pave the way for the next generation of lending while improving the financial health of people around the world.” At Experian, we understand the challenges fintechs face – and our real-world solutions help fintech clients stay ahead of constantly changing market conditions and demands. “Experian’s pace of innovation is very impressive – we are helping both lenders and consumers by delivering technological solutions that make the lending ecosystem more efficient,” said Experian Senior Account Executive Warren Linde. “Financial technology is arguably the most important type of tech out there, it is an honor to be a part of Experian’s fintech team and help to create a better tomorrow.” If you’d like to learn more about Experian’s fintech solutions, visit us at Experian.com/Fintech.

Your consumers’ credit score plays an important role in how lenders and financial institutions measure their creditworthiness and risk. With a good credit score, which is generally defined as a score of 700 or above, they can quickly be approved for credit cards, qualify for a mortgage, and have easier access to loans with lower interest rates. In the spirit of Financial Literacy Month, we’ve rounded up what it takes for consumers to have a good credit score, in addition to some alternative considerations. Pay on Time Life gets busy and sometimes your consumers miss the “credit card payment due” note on their calendar squished between their work meetings and doctor’s appointment. However, payment history is one of the top factors in most credit scoring models and accounts for 35% of their credit score. As the primary objective of your consumers’ credit score is to illustrate to lenders just how likely they are to repay their debts, even one missed payment can be viewed negatively when reviewing their credit history. However, if there is a missed payment, consider checking their alternative financial services payments. They may have additional payment histories that will skew their creditworthiness more so than just their record according to traditional credit lines alone. Limit Credit Cards When your consumers apply for a new loan or credit card, lenders “pull” their credit report(s) to review their profile and weigh the risk of granting them credit or loan approval. The record of the access to their credit reports is known as a “hard” inquiry and has the potential to impact their credit score for up to 12 months. Plus, if they’re already having trouble using their card responsibly, taking on potential new revolving credit could impact their balance-to-limit ratio. For your customers that may be looking for new cards, Experian can estimate your consumers spend on all general-purpose credit and charge cards, so you can identify where there is additional wallet share and assign their credit lines based on actual spending need. Have a Lengthy Credit History The longer your consumers’ credit history, the more time they’ve spent successfully managing their credit obligations. When considering credit age, which makes up 21% of their credit score, credit scoring models evaluate the ages of your consumers’ oldest and newest accounts, along with the average age of all their accounts. Every time they open new credit cards or close an old account, the average age of their credit history is impacted. If your consumer’s score is being negatively affected by their credit history, consider adding information from alternative credit data sources for a more complete view. Manage Debt Wisely While some types of debt, such as a mortgage, can help build financial health, too much debt may lead to significant financial problems. By planning, budgeting, only borrowing when it makes sense, and setting themselves up for unexpected financial expenses, your consumers will be on the path to effective debt management. To get a better view of your consumers spending, consider Experian’s Trended3DTM, a trended attribute set that helps lenders unlock valuable insights hidden within their consumers’ credit scores. By using Trended3DTM data attributes, you’ll be able to see how much of your consumers’ credit line they typically utilize, whether they tend to revolve or transact, and if they are likely to transfer a balance. By adopting these habits and making smart financial decisions, your consumers will quickly realize that it’s never too late to rebuild their credit score. For example, they can potentially instantly improve their score with Experian Boost, an online tool that scans their bank account transactions to identify mobile phone and utility payments. The positive payments are then added to their Experian credit file and increase their FICO® Score in real time. Learn More About Experian Boost Learn More About Experian Trended 3DTM

What if you had an opportunity to boost your credit score with a snap of your fingers? With the announcement of Experian BoostTM, this will soon be the new reality. As part of an increasingly customizable and instant consumer reality in the marketplace, Experian is innovating in the space of credit to allow consumers to contribute information to their credit profiles via access to their online bank accounts. For decades, Experian has been a leader in educating consumers on credit: what goes into a credit score, how to raise it and how to maintain it. Now, as part of our mission to be the consumer’s bureau, Experian is ushering in a new age of consumer empowerment with Boost. Through an already established and full-fledged suite of consumer products, Experian Boost is the next generation offering a free online platform that places the control in the consumers’ hands to influence their credit scores. The platform will feature a sign-in verification, during which consumers grant read-only permission for Experian Boost to connect to their online bank accounts to identify utility and telecommunications payments. After they verify their data and confirm that they want the account information added to their credit file, consumers will receive an instant updated FICO® Score. The history behind credit information spans several centuries from a group of London tailors swapping information on customers to keeping credit files on index cards being read out to subscribers over the telephone. Even with the evolution of the credit industry being very much in the digital age today, Experian Boost is a significant step forward for a credit bureau. This new capability educates the consumer on what types of payment behavior impacts their credit score while also empowering them to add information to change it. This is a big win-win for consumers and lenders alike. As Experian is taking the next big step as a traditional credit bureau, adding these data sources is a new and innovative way to help consumers gain access to the quality credit they deserve as well as promoting fair and responsible lending to the industry. Early analysis of Experian’s Boost impact on the U.S. consumer credit scores showed promising results. Here’s a snapshot of some of those findings: These statistics provide an encouraging vision into the future for all consumers, especially for those who have a limited credit history. The benefit to lenders in adding these new data points will be a more complete view on the consumer to make more informed lending decisions. Only positive payment histories will be collected through the platform and consumers can elect to remove the new data at any time. Experian Boost will be available to all credit active adults in early 2019, but consumers can visit www.experian.com/boost now to register for early access. By signing up for a free Experian membership, consumers will receive a free credit report immediately, and will be one of the first to experience the new platform. Experian Boost will apply to most leading consumer credit scores used by lenders. To learn more about the platform visit www.experian.com/boost.

Good job, check. Shared interests, check. Chemistry, check. He seems like a perfect 10. Both of you enjoy your first date and while getting ready for the second, you dare to imagine that turning into another and another, and possibly happily ever after. Then one decidedly unromantic question comes to mind: What is his credit score? Reviewing a potential partner’s credit score and report is important to many singles who are looking for lasting love. According to Bankrate.com, 42 percent of Millennials said that knowing someone’s credit score would affect their desire to date them, slightly more than 40 percent of Gen Xers and 41 percent of Baby Boomers. They may be on to something. Research shows that knowing someone’s credit history and sense of financial responsibility could save people time – and potential heartache. A UCLA study about money and love shows a very strong link between high credit scores and long-lasting relationships. People with drastically different credit scores may experience more financial stress down the road, placing a burden on a relationship. An Experian report reveals 60 percent of people believe it’s important for their future spouse to have a good credit score, and 25 percent of people from the UCLA study were willing to leave a partner with poor credit before marriage so they aren’t held back. While that three-digit number doesn't tell a person’s whole financial story, it can reveal financial habits that could impact your life. Banks are wary of making loans to borrowers with tarnished scores, typically 660 and below. A low score could quash dreams of buying a home, and result in steep interest rates, up to 29 percent, for credit cards, car financing and other unsecured loans. A mid-range credit score can also hurt an application for an apartment and drive up the cost of mobile phone plans and auto insurance. Eight states have passed laws limiting employers’ ability to use credit checks when assessing job candidates, yet 13 percent of employers surveyed by the Society of Human Resource Management performed credit checks on all job applicants. Talking spending styles and revealing credit scores sooner rather than later in a relationship isn’t necessarily comfortable. But it may help you decide whether you have compatible financial outlooks and practices.

Which part of the country has bragging rights when it comes to sporting the best consumer credit scores? Drum roll please … Honors go to the Midwest. In fact, eight of the 10 cities with the highest consumer credit scores heralded from Minnesota and Wisconsin. Mankato, Minn., earned the highest ranking with an average credit score of 708 and Greenwood, Miss., placed last with an average credit score of 622. Even better news is that the nation’s average credit score is up four points; 669 to 673 from last year and is only six points away from the 2007 average of 679, which is a promising sign as the economy continues to rebound. Experian’s annual study ranks American cities by credit score and reveals which cities are the best and worst at managing their credit, along with a glimpse at how the nation and each generation is faring. “All credit indicators suggest consumers are not as ‘credit stressed’ — credit card balances and average debt are up while utilization rates remained consistent at 30 percent,” said Michele Raneri, vice president of analytics and new business development at Experian. As for the generational victors, the Silents have an average 730, Boomers come in with 700, Gen X with 655 and Gen Y with 634. We’re also starting to see Gen Z emerge for the first time in the credit ranks with an average score of 631. Couple this news with other favorable economic indicators and it appears the country is humming along in a positive direction. The stock market reached record highs post-election. Bankcard originations and balances continue to grow, dominated by the prime borrower. And the housing market is healthy with boomerang borrowers re-emerging. An estimated 2.5 million Americans will see a foreclosure fall of their credit report between June 2016 and June 2017, creating a new pool of potential buyers with improved credit profiles. More than 12 percent who foreclosed back in the Great Recession have already boomeranged to become homeowners again, while 29 percent who experienced a short sale during that same time have also recently taken on a mortgage. “We are seeing the positive effects of economic recovery with the rise in income and low unemployment reflected in how Americans are managing their credit,” said Raneri. Which means all is good in the world of credit. Of course there is always room for improvement, but this year’s 7th annual state of credit reveals there is much to be thankful for in 2016.