Editor's Note: Story and headline updated for clarity and to correct timing of Experian's purchase of Clarity Services. Experian has rolled out its first innovation stemming from its purchase of Clarity in October.
This past fall, two of the traditional credit bureaus each acquired a different specialist in alternative consumer credit data.
And now one of those credit bureaus, Experian, has rolled out its first offering from that purchase: Clear Early Risk Score.
According to an announcement distributed on Monday morning, Experian — through its acquisition of Clarity back in October — now has increased visibility on more than 62 million consumers who rely on small-dollar loans, point-of-sale financing and auto title loans.
Experian highlighted that auto finance companies and other lenders can gain a previously unavailable view of consumer loan and payment activity, spanning both mainstream and alternative financing, from one of the most comprehensive consumer credit databases in the industry, while providing financial access to more consumers.
Following the Experian acquisition of Clarity Services in October, TransUnion made a similar move within the space and acquired FactorTrust last November.
Delivering on its commitment to help finance companies reduce risk and be more inclusive to consumers, Experian highlighted it is bringing its Clear Early Risk Score to market. This new score is designed to clear a wider path for more types of alternative credit data to be leveraged in lending and provides a unique view of how accounts are performing in the early stages of credit relationships.
To understand more about the market need surrounding this development, Clarity’s upcoming 2018 Subprime Lending Trends Report shows that installment loan sizes have increased by 17 percent since 2016, and non-prime consumers have shown improved stability over the last four years.
These trends, along with the fact that approximately one-third of U.S. adults depend on alternative financing, underscore how important this segment is to our economy. Experian insisted it is invested in bringing new types of data into the risk evaluation process to help make a difference in our evolving society.
Officials highlighted Clear Early Risk Score is designed to do just that — bring a deeper level of alternative data into focus with an unprecedented lens. The score was created using one of the most comprehensive repositories of positive and negative alternative financial services information available today, which can give institutions a view of financial behavior across the full U.S. lending spectrum.
The score, which applies unique analytics leveraging both Experian’s national credit bureau and Clarity Services’ specialty credit bureau, can predict a consumer’s creditworthiness over a 12-month period. This expanded early risk insight for finance companies can translate into improved access to credit for responsible borrowers.
“Our clients are constantly innovating when it comes to better understanding consumer financial behaviors. It’s at the heart of their business growth and customer relationships,” said Andrew Sheehan, general manager of Clarity Services at Experian.
“This comprehensive score taps Experian’s proven credit bureau and analytical expertise, along with our newest alternative credit data, to deliver insights spanning both mainstream and nontraditional lending,” Sheehan continued. “Making this connection is a major step forward for Experian clients and consumers.”
Experian pointed out that approximately 25 percent of U.S. consumers are considered “thin file” because they have fewer than five items in their traditional credit histories. These consumers often face significant obstacles to obtaining credit and have limited credit options.
By adding the information from alternative credit data sources, Experian thinks these consumers may gain more access to credit. Being able to assess risk and extend contracts confidently to borrowers with either thin or thick files is a unique benefit that will empower lenders and provide a complete picture of the consumer.
Experian went on to stress that greater visibility and transparency around payment behaviors is a critical element in lending in a post-recession environment. The company added that making the right decisions benefits not only the lender, but also the applicant.
“It’s our number one goal to improve credit access for millions of consumers. An increasing number of consumers in this country are relying on alternative finance products, and these individuals should be visible and able to build or rebuild credit with the positive payments they make,” said Alex Lintner, president of Experian Consumer Information Services.
“This is another step forward in our strategy to expand reach and be more inclusive. We are committed to helping create a better path for these consumers to secure affordable credit and financial opportunities.”
To learn more about trends in alternative financial services and the increased consumer visibility alternative credit data offers to lenders, Experian is hosting a free, 60-minute webinar on Tuesday at 1 p.m. (EST). Registration for the session can be completed here.