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For decades, the credit scoring system has relied on traditional data that only examines existing credit captured on a credit report – such as credit utilization ratio or payment history – to calculate credit scores. But there's a problem with that approach: it leaves out a lot of consumer activity. Indeed, research shows that an estimated 28 million U.S. adults are “credit invisible," while another 21 million are “unscorable."1 But times are changing. While conventional credit scoring systems cannot generate a score for 19 percent of American adults,1 many lenders are proactively turning to expanded FCRA-regulated data – or "alternative data" – for solutions. Types of expanded FCRA-regulated data By tapping into technology, lenders can access expanded FCRA-regulated data, which offers a powerful and complete view of consumers' financial situations. Expanded public record data This can include professional and occupational licenses, property deeds and address history – a step beyond the limited public records information found in standard credit reports. Such expanded public record data is available through consumer reporting agencies and does not require the customer's permission to use it since it's a public record.1 “Experian has partnerships with these agencies and can access public records that provide insight into factors like income and housing stability, which have a direct correlation with how they'll perform," said Greg Wright, Chief Product Officer for Experian Consumer Information Services. “For example, lenders can see if a consumer's professional license is in good standing, which is a strong correlation to income stability and the ability to pay back a loan." Rental payment data Experian RentBureau draws updated rental payment history data every 24 hours from property managers, electronic rent payment services and collection companies. It can also track the frequency of address changes. “Such information can be a good indicator of risk," said Wright. “It allows lenders to make informed judgments about the financial health and positive payment history of consumers." Consumer-permissioned data With permission from consumers, lenders can look at different types of financial transactions to assess creditworthiness. Experian Boost™, for example, enables consumers to factor positive payment history, such as utilities, cell phone or even streaming services, into an Experian credit file. “Using the Experian Boost is free, and for most users, it instantly improves their credit scores," said Wright. “Overall, those 'boosted' credit scores allow for fairer decisioning and better terms from lenders – which gives customers a second chance or opportunity to receive better terms." Financial Management Insights Financial Management Insights considers data that is not captured by the traditional credit report such as cash flow and account transactions. For instance, this could include demand deposit account (DDA) data, like recurring payroll deposits, or prepaid account transactions. “Examining bank account transaction data, prepaid accounts, and cash flow data can be a good indicator of ability to pay as it helps verify income, which gives lenders insights into consumers' cash flow and ability to pay," Wright added. Clarity Credit Data With Experian's Clarity Credit Data, lenders can see how consumers use expanded FCRA-regulated data along with their related payment behavior. It provides visibility into critical non-traditional loan information, including more insights into thin-file and no-file segments allowing for a more comprehensive view of a consumer's credit history. Lift Premium™ By using multiple sources of expanded FCRA-regulated data to feed composite scores, along with artificial intelligence and machine learning, Lift Premium™ can vastly increase the number of consumers who can be scored. For example, research shows that Lift Premium™ can score 96 percent of American adults ­– a significant increase from the 81 percent that are scorable with conventional scores relying on only traditional credit data. Additionally, such enhanced composite scores could enable 6 million of today's subprime population to qualify for “mainstream" (prime or near-prime) credit.1 How is expanded FCRA-regulated data changing the credit scoring system? The current credit scoring system is rapidly evolving, and modern technology is making it easier for lenders to access expanded FCRA-regulated data. Indeed, this data disruption is changing lender business in a positive way. “When lenders use expanded credit data assets, they see that many unscorable and credit invisible consumers are in fact creditworthy," said Wright. “Layering in expanded FCRA-regulated data gives a clearer picture of consumers' financial situation." By expanding data assets, tapping into artificial intelligence and machine learning, lenders can now score many more consumers quickly and accurately. Moreover, forward-thinking lenders see these expanded data assets as offering a competitive edge: it's estimated that modern credit scoring methods could allow lenders to grow their pool of new customers by almost 20 percent.1 Case study: Consumer-permissioned data To date, over 9 million people have used Experian Boost. The technology uses positive payment history as a way to recognize customers who exhibit strong credit behaviors outside of traditional credit products. “Boosted" consumers were able to add on average 14 points to their FICO scores in 2022 so far, making many eligible for additional financial products with better terms or better product offerings. Active Boost consumers, post new origination performed on par or better than the average U.S. originator, consistently over time. “In other words, having this additional lens into a consumer's financial health means lenders can expand their customer base without taking on additional credit risk," explains Wright. The bottom line The world of credit data is undergoing a revolution, and forward-thinking lenders can build a sound business strategy by extending credit to consumers previously excluded from it. This not only creates a more equitable system, but also expands the customer base for proactive lenders who see its potential in growing business. Learn more 1Oliver Wyman white paper, “Financial Inclusion and Access to Credit,” January 12, 2022.

What if there was a way to assess your data security readiness before a breach happens? Imagine the worst thing that could happen to your organization. Your system is hacked, exposing proprietary and confidential information including upcoming projects and consumer data. Consumer identity theft incidents skyrocket under your name. Competitors begin to take notice and pounce on their opportunity to move into your customer base. Your employees begin to fear for their job security and your consumers fear for their financial safety. With so much at stake, you need to have a solid plan in place before a data breach occurs. The best way to improve your organization’s cybersecurity is by conducting data breach simulation, which means testing yourself for vulnerabilities before threat actors do. Verizon’s Data Breach Report shows that 85% of breaches involved a human element, while only 3% involved vulnerability exploitation.[1] Unfortunately, humans are prone to error. According to the results of Terranova Security’s 2020 Gone Phishing Tournament, almost 20% of all employees are likely to click on phishing email links.[2] Verizon’s report also found that stolen or misused credentials were responsible for 61% of data breaches. The most dangerous passwords to have stolen are those that provide privileged access to your organization’s networks. It is critical to have a Password Manager to protect your assets. Experian offers data breach simulation and breach response exercises that test your digital defenses. We will assess what you can do before, during, and after a simulated attack to enhance your response plan. Before: Consider how often you want to run these tests. They can take place once a year, every six months, quarterly, monthly or any other desired frequency. Determine if you want to use in-house staff or hire internal teams to conduct the exercises. Research potential threat actors who are most likely to target your industry and compile a list of possible aims and methods for each one. Identify targets and also non-targets — resources that are off-limits. Form clear objectives. For example: Infiltrate specific business network, steal the credentials of the IT administrator, and exfiltrate financial data. Define the parameters of the plan by determining where the simulated attacker got their information (i.e., insider information or public knowledge) and what they would know. During: Launch the attack (Example: send a phishing email to get a victim to install malware through link) Monitor both physical and digital access points Take note of departments and staff that are most likely to be targeted in an attack. Assess internal threats and openings for security breaches. After: Review incident response plan with gap analysis Did an internal employee make an error of opening a malicious email attachment? Did the simulated attacker gain access to an area they shouldn’t have been in? Did any alerts go off in the process, or fail to go off? Was physical security able to stop threats on the ground? Rank vulnerabilities and weak spots in order of which need to be fixed first. Test the changes by repeating the attack to see if the problem has been solved. The best way to fight a threat actor is to understand their methods and fix your vulnerabilities before they can be exploited. Through data breach simulation attacks, you can find out where your weaknesses lie before an actual attack takes place and let the assessment inform the development of risk mitigation strategies and action plans. For more information on how you can protect your business from data breach threats, visit us at Experian Data Breach Resolution. Experian has the tools and resources you need to stay ahead of the curve in today’s digital world. Visit our website [1] Verizon. 2021. 2021 DBIR Master’s Guide. [2] Terranova Security. 2020. Gone Phishing Tournament.

Over the past few years, there has been significant momentum in the alternative fuel vehicle market as the speed of new model introductions has raced forward. And now, with more options available and improved infrastructure driving popularity, we’re seeing more consumers finance alternative fuel vehicles than previous years. The State of the Automotive Finance Market: Q4 2021 report broke down alternative fuel financing trends—specifically how electric vehicle (EV) financing doubled year-over-year. Here are some of the trends we found. EV vehicle popularity is increasing While multiple alternative fuel vehicle segments made up 15.91% of new vehicle financing this quarter, an increase from 11.8% in Q4 2020, EV financing has grown significantly compared to half a decade ago. In Q4 2021, EVs made up 4.56% of new vehicle financing, doubling from 2.25% in Q4 2020 and a substantial jump from five years ago at 0.57% in Q4 2016. As EVs continue to become more popular, looking at what models people finance will help lenders and dealers understand consumer preferences and make more informed decisions. In Q4 2021, three Tesla models made up the majority of the top financed EVs: the Tesla Model 3 took the lead at 36.62%, followed by the Tesla Model Y at 34.18% and the Tesla Model S at 5.3%. Rounding out the top five were the Ford Mustang Mach-E (6.02%) and the Volkswagen ID.4 (3.4%). The remarkable growth in EV financing demonstrates how influential this fuel type is becoming in the automotive industry. Average monthly payments for top EV models Consumer predilections clearly show they would rather purchase a new EV than lease it, with 72.3% of new EV financing being loans and the remaining 27.7% being leases in Q4 2021. In the past, we have seen some EVs typically have higher monthly payments than other alternative fuel vehicles, but there were many budget-friendly options for EV models this quarter. For example, the average monthly loan payment for a Nissan LEAF was $515 while its average monthly lease payment was $307 in Q4 2021. Similarly, the average monthly loan payment for a Hyundai Ioniq came in at $520 and its average monthly lease payment was $219 this quarter. It is notable that the overall average monthly loan payment for an EV was $774, while the average monthly lease payment was $688 in Q4 2021. With many more alternative fuel vehicle models on the horizon, this market will only continue to grow. Understanding the current state of alternative vehicle financing provides industry players additional context to this growing vehicle segment. Staying close to the data enables lenders and dealers make informed decisions in the quarters to come. To learn more about EV financing and other automotive finance trends, watch the entire State of the Automotive Finance Market: Q4 2021 webinar.