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In a recent report, the Consumer Financial Protection Bureau (CFPB) estimated that there are more than 45 million American consumers that are “credit invisible,” meaning that they either have no credit history or a credit file too thin to receive access to mainstream credit products. This limits their ability to get an affordable loan for a car, realize the dream of homeownership or even restricts access to capital to start a small business. More frequently, a lack of credit history forces consumers to turn to more expensive, short term lending options. While credit invisibles may not have a traditional credit history, many make their cable, utility and mobile phone payments on time. However, this on-time payment data is not being included in their credit file. Historically, telecom and utility companies have only reported instances when a consumer is behind on payments or an account has been turned over to collections. This means that credit invisibles may have negative data from telecom and utility companies in their file, but are unable to build their credit file with positive data even if they make on-time payments each month. The good news is that Congressional leaders have recognized the need for action. On December 3 the Credit Access and Inclusion Act (H.R. 4172 and S.2355) was reintroduced in Congress, with Representatives Mike Fitzpatrick (R-Penn.) and Keith Ellison (D-MN) taking the lead in the House and Senators Mark Kirk (R-Ill.) and Joe Manchin (D-WVA) taking up the effort in the Senate. The bipartisan bill would amend the Fair Credit Reporting Act to make clear that utilities, telecommunication and rental companies can report on-time payment histories and positive data to the nation’s credit reporting bureaus, rather than just late payments or collection actions that they are currently furnishing. It would in no way require these companies to do so, but would help reassure these entities that there are no regulatory barriers to reporting on-time payment information. There is a detailed track record of research showing how the inclusion of alternative data will enable millions of credit invisible American consumers who have a proven track record of meeting financial obligations to access mainstream credit. A recent study by PERC and the Brookings Institution found that when energy utility and telephone firms report timely and late payment data alike, those who are deemed credit invisible shrunk to around 5 million. A separate study has also shown that the inclusion of this credit data would be a net positive for traditionally underserved populations, including minorities, young adults and the elderly. Moreover, a 2014 Experian study found that by including on-time utility payments in credit reports, there was nearly a 50 percent drop in subprime consumers with credit scores* between 300 and 600; a 54 percent increase in consumers considered nonprime with credit scores between 601 and 660; and a 15 percent increase in those with credit scores over 661, generally considered prime. I encourage lawmakers to take up this legislation and move it forward to ensure that consumers receive credit for meeting their financial obligations.
The Orange County Register recently recognized Experian as one of the Top Workplaces among hundreds of leading companies in Orange County for the third year in a row. In addition, we were recognized for our efforts to make our communities better, earning a separate award as the top large business for Social Responsibility. This was based on Experian contributing more than 4,000 hours in volunteer time to various charities, including our work with Big Brothers Big Sisters of Orange County, volunteering time at 25 high schools and providing counseling and help at the OC Rescue Mission. The selection process is based solely on employee feedback gathered from a survey. This methodology is important because it reflects what our employees think of Experian. It shows that we’re more than just a place where people work, rather we’re a community where our team members take pride in contributing. “Every day, our team members go to work with the aim of helping more people achieve their financial goals like buying a home, or helping businesses make better informed decisions through smart analytics,” said former Experian North America CEO Craig Boundy. “Every day, we’re driven to find new ways to use data for good, because corporate social responsibility lies at the heart of Experian.” We promote a culture of community volunteerism. Last year, Experian employees contributed thousands of hours in volunteer time for our North American philanthropy partners, while raising and donating nearly a million dollars. For example, we provide credit education to people struggling to overcome a legacy of homelessness as part of our data for good mission. We do this by working with the Orange County Rescue Mission, an organization that provides a host of potentially life-changing services: on-campus housing, drug rehab, counseling, parenting and life skills classes, and job search training. We also partner with the nonprofit American Student Assistance to provide support to recent graduates and students managing their student loan debt. We do this by offering our Credit Educator product at no charge to students, graduates and their parents who have been in touch with ASA and who need information about their credit and how their student funding decisions can affect their future creditworthiness. Social responsibility is at the very heart of Experian – and something that we encourage. “This third consecutive award recognizing us as a Top Workplace in Orange County reflects that our focus on professional development, a positive environment, and opportunities to contribute to our communities is well-received by our team members,” said Boundy. Experian employees continue to make a difference in the Orange County community, which we have called home for more than 40 years. We’re proud that the Orange County Register continues to view Experian as a Top Workplace.
There are many things that can cause angst for consumers during the holiday season including travel delays, overeating, and picking a New Year’s resolution. One of the biggest stressors is often the financial impact of holiday shopping. In fact, according to a national survey by Experian, many respondents are concerned about the financial stress of gift buying and adding debt, as well as becoming an identity theft victim. While some survey respondents feel cheerful (39 percent) and excited (38 percent) about the holidays, many believe holiday shopping is a strain (60 percent), and almost half feel obligated to spend more than they can afford (41 percent). How will they pay for holiday gifts? They will be using credit as almost half of those surveyed plan to use credit for about 25 percent of their expenditures. Unfortunately, missing payments or opening new cards can damage a consumer’s credit profile – ten percent of respondents say holiday shopping has negatively affected their credit scores. Another concern for consumers is the risk of identity theft (50 percent). Survey respondents feel the risk is both present while shopping at “brick and mortar” retail locations or online with 55 percent choosing both as equally vulnerable. While 30 percent of respondents cite online shopping as riskier, almost half still plan to shop online. View the full report in the SlideShare deck below: Experian Consumer Holiday Shopping Survey from Experian_US
Today, we stand at the forefront of a digital revolution that is reshaping the financial services industry. And, against this backdrop, financial institutions are at vastly different levels of maturity; the world’s biggest banks are managing large-scale infrastructure migrations and making significant investments in AI while regional banks and credit unions are putting plans in place for modernization strategies, and fintechs are purpose-built and cloud native. To explore this more, I recently had the privilege of attending the annual Reuters NEXT live event in New York City. The event gathers globally recognized leaders across business, finance, technology, and government to tackle some of today’s most pressing issues. On the World Stage, I joined Del Irani, a talented anchor and broadcast journalist, to discuss the future of lending and the pivotal role of data and AI in building a more inclusive financial system. Improving financial access Our discussion highlighted the lack of access to traditional financial systems, and the impact it has on nearly 100 million people in North America alone. Globally, the problem affects over one billion people. These people, who are credit invisible, unscoreable, or have subprime credit scores, are unable to secure everyday financial products that many of us take for granted. What many don’t realize is, this is not a fringe subset of the population. Most of us, myself included, know someone who has faced the challenges of financial exclusion. Everyday Americans, including young people who are just starting out, new immigrants and people from diverse communities, often lack access to mainstream financial products. We discussed how traditional lending has a limited view of a consumer. Like looking through a keyhole, the lender’s understanding of the person in view is often incomplete and obstructed. However, with expanded data, technology, and advanced analytics, there is an opportunity to better understand the whole person, and as a result have a more inclusive financial system. At Experian, we have a unique ability to connect the power of traditional credit with alternative data, bringing a more holistic understanding of consumers and their behaviors. We are dedicated to leveraging our rich history in data and our expertise in technology to create the future of credit and ultimately bring financial power to everyone. The future of lending After spending two days with over 700 industry leaders from around the world, one thing is abundantly clear: much like the early days of the internet, today, we are at the cutting-edge of a technical revolution. Reflecting on my time at Reuters NEXT, I am particularly excited by the collective commitment to drive innovative, and smarter ways of working. We are only beginning to scratch the surface of how data and technology can transform financial services, and Experian is positioned to play a significant role. As we look to the future, I am excited about the ways we will create new opportunities for businesses and consumers alike.
We believe that financial literacy leads to empowerment. That is why Experian supports initiatives and partners with community organizations to deliver financial education. We also develop products and services that give more control to consumers over their credit profile and financial health. As part of advancing our mission of Financial Power to All®, we are proud to announce we are helping more than 5,000 Hispanic individuals nationwide by relieving $10 million dollars of consumer debt. To provide families with this boost, we joined forces with ForgiveCo, a Public Benefit Corporation (PBC), to administer the acquisition and cancellation of qualifying consumer debt for the selected recipients. Beneficiaries will also receive a one-year premium Experian membership for free that offers access to their Experian credit report in English and Spanish[i], FICO® Score[ii], bilingual educational content, and other financial resources. We hope this effort helps raise awareness of the importance of financial literacy for everyone, and that Experian has resources to help individuals reach their financial dreams. To amplify the message, we collaborated with multi-platinum, award-winning singer and songwriter Prince Royce and you can see his video here. In fact, we have been making a concerted effort the last several years to evolve our educational resources and products to better support all underserved communities. Some of our other activities include the creation of the B.A.L.L. for Life initiative that connects African American and Hispanic youth with financial education, supporting scholarships for Asian Americans through the Ascend organization, providing custom resources for Out & Equal and Born This Way Foundation for the LGBTQ+ community, supporting the NextGen Innovation Lab for Disability:IN, and sponsoring credit counseling for the military community with Operation HOPE. For resources in Spanish, Experian offers a credit e-book and consumers can access a full suite of articles at the Ask Experian blog here. [i] Only Experian credit reports are available in Spanish. All other services associated with an Experian membership are available in English only. English fluency is required for full access to Experian’s products. [ii] Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.
Amid some of the financial challenges that underserved communities experience, members across the financial services community remain committed to championing initiatives and programs that drive greater financial inclusion. In fact, collaboration has led to the inclusion of non-debt related payment information on consumers’ credit profiles, as well as digital services that make it easier to manage money. These efforts have helped to broaden access to fair and affordable financial resources for more individuals. While significant progress has been made, there is still more work to do. However, some of the misconceptions and myths about the financial services community are hindering further advancement. Debunking these myths will accelerate progress by building trust between the financial services community and consumers. Person withdrawing money from ATM contactless Myth #1: “Financial institutions have no interest in underserved consumers or credit invisibles.” The truth is, banks and credit unions want to say “yes” to more prospective borrowers, including individuals and families from underserved communities. Beyond being the right thing to do, it’s an opportunity to potentially build lifelong relationships with a relatively untapped market. A show of good faith to communities who have largely been ignored by the financial system could lead to customer loyalty that may extend to their family and friends. That’s why participants across the financial ecosystem have been proponents of including expanded data sources—such as on-time telecom, utility and video streaming service payments—on to consumer credit reports, as well as exploring other Fair Credit Reporting Act (FCRA)-regulated data sources, including payment data on short-term small dollar loans and expanded public records data. Making this data more accessible to lenders provides a more comprehensive view of a consumer’s ability and willingness to repay outstanding debt—an actionable solution to extending credit to consumers without lenders taking on additional risk. Myth #2: “There is a lack of trustworthy financial education resources.” The financial services community and affiliated organizations recognize that empowering people with financial knowledge and skillset are critical to consumers’ financial success. In fact, banks and credit unions are partnering with nonprofits and non-governmental organizations to better understand the unique challenges and opportunities within specific communities and provide relevant tools and resources. For example, Experian’s B.A.L.L. for Life (Be A Legacy Leader) program, launched in partnership with the National Urban League, serves as a catalyst for engaging with Black communities and low-income youth through live events and digital financial education. Subject matter experts, professional athletes, celebrities, and other influencers share their experiences and expertise, covering topics such as banking, credit, financial management and investing. In addition, to help people improve their financial management, Experian partners with the National Foundation for Credit Counseling (NFCC). The NFCC connects consumers with certified financial counselors to help them address various pain points, including debt management, homeownership, student loans or small business cash flow issues. Myth #3: “Underserved communities have few opportunities to build credit and enter the mainstream financial system.” People from underserved communities, as well as younger consumers and recent immigrants are often excluded from the mainstream financial system because they lack an extensive credit history. Historically, it’s created a vicious cycle; in order to get credit, you have to have credit. Fortunately, there has been a sea change in innovative solutions to address the specific needs of these populations. These include new credit scoring models and microfinancing which provide financial services to individuals who may have been excluded from traditional banking systems. In addition, by incorporating expanded data sources, such as telecom, utility and residential rental payments onto credit reports, lenders have more visibility into consumers who may have been excluded by traditional credit scoring methods.These programs help individuals and families from underserved communities establish and build a credit history that could enable loans, or the ability to rent an apartment or open their dream business. An example is Experian Boost®, a free feature that allows Experian members to contribute their history of making utility, cellphone, insurance, residential rent and video streaming service payments directly into their Experian credit profile. By incorporating nontraditional credit data like paying utility bills on time, online banking transactions, rental payments and verified income data, more people can establish a credit profile that can potentially qualify them for a loan. More Inclusion, Fewer Myths It’s encouraging that community organizations and banks are beginning to see the economic and social benefits of aligning on financial literacy and inclusion. As more initiatives come online, underserved populations will be able to establish a better financial foundation. Then, we can declare the myths to be history.