Experian has introduced a new, untraditional credit risk score designed to provide “critical insight for underwriting decisions” to lenders and servicers eyeing the underbanked marketplace.
Experian’s research data show over 20 million underbanked consumers may be eligible for financial products normally reserved for prime credit prospects.
The Experian Extended View predictive score assesses the creditworthiness of consumers who have little or no traditional credit history, attendees of SourceMedia’s Underbanked Conference heard in San Francisco.
It combines three data sources: Experian's credit data, rental information and public record data that together enable users to gain a more accurate view of a consumer's payment behavior. The customer data report is incorporated in a loan review process Experian delivers directly to the lender or the servicer of the loan.
Experian evaluated multiple noncredit bureau data assets combined with credit and rental data from Experian, and used optimization-based analytical techniques to develop the over 300 models included in Extended View.
Extended View score is Fair Credit Reporting Act compliant, and offers a simple to implement score range of 401 to 990, closely aligned to VantageScore, which is the credit industry's first credit score developed jointly by Experian, Equifax and TransUnion.
The new score system is designed to help “redefine how businesses evaluate this underserved population” and in the process create banking opportunities for these consumers. Traditional or not credit scores remain a core delinquency risk measure.
According to president of Experian Consumer Information Services, Steven Wagner, “Many of the estimated 64 million consumers with limited to no credit history” who until now could not be evaluated by traditional credit scores are creditworthy.
Experian findings indicate 30% of the underbanked population “display similar behaviors as low credit risk individuals,” Experian said. It means these underserved consumers could include individuals who are new to credit, new immigrants, consumers mistrustful of banks, even individuals who prefer to use cash.
Among others, Extended View score can be useful to banks, credit unions and auto lenders who are reaching out to the constantly growing underbanked market.
A recent survey by the Center for Financial Services Innovation shows 93% of the financial services respondents see reaching underbanked consumers as important or very important to the future of the industry.
Most of these financial services providers expect the underbanked population to grow in the next two years.
