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If you’re a manager at a business that lends to consumers or otherwise extends credit, you certainly are aware that 10-15% of your current customers and prospective future customers are among the approximately 27 million consumers who are now – or will soon be — fitting another bill into their monthly budgets. Early in the COVID-19 pandemic, the government issued a pause on federal student loan payments and interest. Now that the payment pause has expired, millions of Americans face a new bill averaging more than $200. Will they pay you first? If this is your concern, you aren’t alone: Experian recently held a webinar that discussed how the end of the student loan pause might affect businesses. When we surveyed the webinar attendees,  nearly 3 out of 4 responses included Risk Management as a main concerns now. Another top concern is about credit scores. Lenders and investors use credit scores – bureau scores such FICO® or VantageScore® credit score or custom credit scores proprietary to their institution – to predict credit default risk. The risk managers at those companies want to know to what extent they can continue to rely on those scores as Federal student loan payments come due and consumers experience payment shock. I’ve analyzed a large and statistically meaningful sample (10% of the US consumer population in Experian’s Ascend Sandbox) to shed some light on that question. As background information, the average consumer with student loans had lower scores before the pandemic than the average of the general population. One of my Experian colleagues has explored some of the reasons at https://www.experian.com/blogs/ask-experian/research/average-student-loan-payments). Here are some of the things we can learn from comparing the credit data of the two groups of people. I looked at a period from 2019 and from 2023 to see how things have changed: Average credit scores increased during the pandemic, continuing a long-term trend during which more Americans have been willing and able to meet all their obligations. During the COVID Public Health Emergency, consumers with student loans brought up their scores by an average of 25 points; that was 7 points more than consumers without student loans. Another way to look at it: in 2019, consumers with student loans had credit scores 23 points lower than consumers without. By 2023, that difference had shrunk to 16 points. Experian research shows that there will be little immediate impact on credit scores when the new bills come due. Time will tell whether these increased credit scores accurately reflect a reduction in the risk that consumers will default on other bills such as auto loans or bankcards soon, even as some people fit student loan bills into their budgets. It is well-known that many people saved money during the public health emergency. Since then, the personal savings rate has fallen from a pandemic high of 32% to levels between 3% and 5% this year – lower than at any point since the 2009 recession. In an October 2023 Experian survey, only 36% of borrowers said they either set aside funds or they planned using other financial strategies specifically for the resumption of their student loan payments. Additional findings from that study can be found here. Furthermore, there are changes in the way your customers have used their credit cards over the last four years:   Consumers’ credit card balances have increased over the last four years. Consumers with student loans have balances that are on average $282 (4%) more now than in 2019. That is a significantly smaller increase than for consumers without student loans, whose total credit card debt increased by an average of $1,932 (26%). Although their balances increased, the ratio of consumers’ total revolving debt balances to their credit limits (utilization) changed by less than 1% for both consumers with student loans and consumers without. In 2019, the utilization ratio was 9.8 percentage points lower for consumers with student loans than consumers without. Four years later, the difference is nearly the same (9.6 points). We can conclude that many student loan borrowers have been very responsible with credit during the Public Health Emergency. They may have been more mindful of their credit situation, and some may have planned for the day when their student loan payments will be due. As the student loan pause come to an end, there are a few things that lenders and other businesses should be doing to be ready: Even if you are not a student loan lender, it is important to stay on top of the rapidly evolving student loan environment. It affects many of your customers, and your business with them needs to adapt. Anticipate that fraudsters and abusers of credit will be creative now: periods of change create opportunities for them and you should be one step ahead. Build optimized strategies in marketing, account opening, and servicing. Consider using machine learning to make more accurate predictions. Those strategies should reflect trends in payments, balances, and utilization; older credit scores look at a single point in time. Continually refresh data about your customers—including their credit scores and important attributes related to payments, balances, and utilization patterns. Look for alternative data that will give you a leg up on the competition. In the coming weeks and months, Experian’s data scientists will monitor measures of performance of the scores and attributes that you depend on in your data-driven strategies — particularly focusing on the Kolmogorov-Smirnov (KS) statistics that will show changes in the predictive power of each score and attribute. (If you are a data-driven business, your data science team or a trusted partner should be doing the same thing with a more specific look at your customer base and business strategies.) In future reports and blog posts, we’ll shed light on the impact student loans are having on your customers and on your business. In the meantime, for more information about how to use data and advanced analytics to grow while controlling costs and risks, all while staying in compliance and providing a good customer experience, visit our website.

Over the past few decades, the financial industry has gone through significant changes. One of the most notable changes is the use of alternative credit data1 for lending. This type of data is becoming increasingly essential in consumer and small business lending. In this blog post, we’ll explore the importance of alternative credit data and the insights you can gain from our new 2023 State of Alternative Credit Data Report. Benefits and uses of alternative credit data and alternative lending Alternative credit data and alternative financial services offer substantial benefits to lenders, borrowers, and society as a whole. The primary advantage of alternative credit data is that it provides a more comprehensive and accurate credit history of the borrower. Unlike traditional credit data that focuses on a borrower’s financial past, alternative credit data includes information from non-traditional sources like rent payments, full-file public records, utility bills, and income and employment data. This additional data allows you to gain a better understanding of financial behavior and assess creditworthiness more accurately.Alternative credit data can be used throughout the loan lifecycle, from underwriting to servicing. In the underwriting phase, alternative credit data can help lenders expand their pool of potential borrowers, especially those who lack or have limited traditional credit history. Additionally, alternative credit data can help lenders identify risks and minimize fraud. In the servicing phase, alternative credit data can help lenders monitor financial health and provide relevant services and an enhanced customer experience.Alternative lending is critical for driving financial inclusion and profitability. Traditional credit models often exclude individuals who have limited or no access to credit, causing them to turn to high-cost alternatives like payday loans. Alternative credit data can provide a more accurate assessment of their ability to pay, making it easier for them to access affordable credit. This increased accessibility improves the borrower's financial health and creates new opportunities to expand your customer base. “Lenders can access credit data and real-time information about consumers’ incomes, employment statuses, and how they are managing their finances and get a more accurate view of a consumer’s financial situation than previously possible.”— Scott Brown, President of Consumer Information Services, Experian State of alternative credit data Our new 2023 State of Alternative Credit Data Report provides exclusive insight into the alternative lending market, new data sources, inclusive finance opportunities and innovations in credit attributes and scoring that are making credit scoring more accurate, transparent and inclusive. For instance, the use of machine learning algorithms and artificial intelligence is enabling lenders to develop more predictive alternative credit scoring models and enhance risk assessment.  Findings from the report include: 54% of Gen Z and 52% of millennials feel more comfortable using alternative financing options rather than traditional forms of credit.2 62% of financial institution firms are using alternative data to improve risk profiling and credit decisioning capabilities.3 Modern credit scoring methods could allow lenders to grow their pool of new customers by almost 20%.4 By understanding the power of alternative credit data and staying on top of the latest industry trends, you can widen your pool of borrowers, drive financial inclusion, and grow sustainably. Download now 1When we refer to “Alternative Credit Data,” this refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA Data” may also apply in this instance and both can be used interchangeably.2Experian commissioned Atomik Research to conduct an online survey of 2,001 adults throughout the United States. Researchers controlled for demographic variables such as gender, age, geographic region, race and ethnicity in order to achieve similar demographic characteristics reported in the U.S. census. The margin of error of the overall sample is +/-2 percentage points with a confidence level of 95 percent. Fieldwork took place between August 22 and August 28, 2023. Atomik Research is a creative market research agency. 3Experian (2022). Reaching New Heights with Financial Inclusion 4Oliver Wyman (2022). Financial Inclusion and Access to Credit

Lemon vehicle history is a serious issue that can have a significant impact on the automotive industry. Buying a vehicle that is branded as a lemon may harm a dealership or the OEM's reputation. Customers may be less likely to buy automobiles from that manufacturer or dealership in the future if they learn the vehicle they bought was branded a lemon. Used vehicles with lemon vehicle history has implications Furthermore, automakers may incur higher costs as the expense of buying back and fixing lemon vehicles is frequently the responsibility of the auto manufacturers. Finally, the used automobile market may be impacted by a vehicle's lemon history. Used cars with lemon vehicle history events are frequently worth less than equivalent autos without such activity. New lemon-reported events analysis infographic available View our most recent Vehicle Insights Infographic Report: Lemon Reported Events Data Analysis. You’ll learn more about lemon-reported activity for vehicles, what percentage of owners repurchase a different vehicle after the initial reported activity, and how many vehicles with the lemon event history are still on the road. We have a series of vehicle insight infographic reports you may also be interested in: Water and Flood Reported Events Vehicle Accident and Damage Insights