COSTA MESA, Calif.–(BUSINESS WIRE)–Nearly 106 million U.S. consumers are unable to obtain credit at prevailing rates, either because they are invisible to credit, cannot be scored by conventional credit scores, or whether they have a subprime or lower credit rating, according to new research released today by Experian® and Oliver Wyman. Research shows that by using extended data sets such as lease payments, trend data, utility information and more, and advanced analytics in their decision-making, lenders can improve the access to credit for nearly 50 million invisible and unassessable credit consumers, as well as millions of consumers currently considered subprime.
“We are committed to providing lenders with the right tools and information to drive financial inclusion and have seen significant progress in recent years, with many leading lenders leveraging the Fair Credit Reporting Act’s expanded regulated data and advanced analytics,” said Greg Wright, chief product officer and senior executive. Vice President at Experian Consumer Information Services. “Yet, as an industry, we can and must do better to ensure that more consumers can access financial services at affordable prices. While the results show we are moving in the right direction, financial access is dependent on full industry adoption of new data and information as well as business practices that proactively close the historical gap that existed to serve more consumers.
Access to fair and affordable credit can help consumers get a college degree, buy a car or home, start or grow a business, and ultimately establish careers, create wealth and achieve greater financial success. Yet, in Financial inclusion and access to creditExperian and Oliver Wyman find that 42% of the adult population does not have a conventional credit score in the range that would generally allow access to credit at prevailing rates.
Additional key findings include:
Nineteen percent of American adults do not have a conventional credit score. This includes 28 million adult Americans who are invisible to credit and 21 million who cannot be rated. Another 57 million have subprime or lower credit scores
Credit invisibility affects underserved communities more frequently with 26% of Hispanic consumers and 28% of black consumers unrated or invisible, compared to 16% of white and Asian consumers
Credit invisibility often affects young consumers, with 40% of dark credit in the US under 25
Immigrants and consumers in lower-income neighborhoods are more likely to face barriers to accessing traditional financial services
The report shows that lenders can expand access to credit for currently underserved consumers by increasing the number of consumers they can assess and improving their ability to identify the true credit quality of borrowers. Leveraging extended data or non-traditional credit data and advanced analytics can help lenders achieve both.
According to Experian research, when advanced analytics and machine learning are combined with extended datasets as they are with Experian’s Lift Premium™ score, 96% of candidates can be scored, including approximately 65% of the invisible credit population and the entire population not conventionally notable. population. This is significantly more than the 81% of consumers who can be rated by conventional scores. Additionally, 6 million consumers whose conventional scores are subprime could be upgraded to near-prime or above based on the extended data used in the score.
“Now is the time to start leveraging sophisticated tools like Experian Lift Premium™ to ensure all consumers can get the credit they deserve,” added Wright.
The report also highlights increased opportunities to further drive financial inclusion with expanded data sets, including utility payments, rental payments, consumer-authorized data, and bank account data. A noted example is Experian Boost™. Since its launch in 2019, nearly 9 million consumers have signed up for Experian Boost to improve their credit scores by adding their one-time cell phone, utility, and video streaming service payments directly to their Experian credit report.1.
Lenders can increasingly use not only their own relational banking data, but also consumer-authorized data from other financial accounts to improve their credit decisions. The use of consumer-authorized data in underwriting, once reserved for fintech disruptors, is growing among traditional lenders.
“Responsible expansion of access to credit is both an untapped business opportunity and a chance to have a positive social impact in our communities and with historically disadvantaged groups,” said Mike Hepinstall, Partner at Oliver Wyman. “Better identifying and serving creditworthy customers is an opportunity to grow while doing good.
For more information and to download the full report, please visit: https://us-go.experian.com/driving-growth-with-greater-credit-access-white-paper?cmpid=pr-release
Experian is the world leader in information services. During life’s big moments – from buying a house or car, to sending a kid to college, to growing a business by connecting with new customers – we enable consumers and our customers to manage their data with confidence. We help individuals gain financial control and access financial services, businesses make smarter decisions and thrive, lenders lend more responsibly, and organizations prevent identity theft and crime. .
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About Olivier Wyman
Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management and organizational transformation. The firm has more than 5,000 professionals worldwide who work with clients to optimize their businesses, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a Marsh McLennan Company [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.
1 Results may vary. Some may not see an improvement in scores or approval ratings. Not all lenders use Experian credit reports, and not all lenders use scores impacted by Experian Boost.