Experian and Oliver Wyman Find Expanded Data and Advanced Analytics Can Improve Access to Credit for Nearly 50 Million Credit Invisible and Unscoreable Americans

Rhea-AI Summary

New research from Experian and Oliver Wyman reveals that nearly 106 million U.S. consumers struggle to secure credit at mainstream rates due to being credit invisible, unscoreable, or holding subprime scores. By employing advanced analytics and expanded data sets like rental and utility payments, lenders can potentially score 96% of applicants, including a significant number of previously unscoreable individuals. Currently, 42% of the adult population lacks a conventional credit score to access affordable credit, highlighting the need for enhanced financial inclusion.

Positive

• 96% of credit applicants can be scored using advanced analytics and expanded data, improving access for 50 million consumers.
• 42% of U.S. adults lack a conventional credit score, indicating a substantial market opportunity for lenders who adapt their practices.

Negative

• Nineteen percent of adults in the U.S. remain without a conventional credit score, representing a significant gap in financial inclusion.
• Credit invisibility disproportionately affects underserved communities, with 26% of Hispanic and 28% of Black consumers being unscoreable.

New research outlines the challenges consumers face when trying to access credit, how the financial services industry can increase financial inclusion and score 96 percent of applicants

COSTA MESA, Calif.--(BUSINESS WIRE)-- Nearly 106 million U.S. consumers are unable to secure credit at mainstream rates either because they are credit invisible, unscoreable by conventional credit scores, or have a subprime or below credit score according to new research released today by Experian® and Oliver Wyman. The research shows that by using expanded data sets such as rental payments, trended data, utility information and more, and advanced analytics in their decisioning, lenders can improve access to credit for nearly 50 million credit invisible and unscoreable consumers, as well as millions of consumers currently considered subprime.

“We are committed to providing lenders with the right tools and insights to drive financial inclusion and have seen significant progress in recent years with many leading lenders leveraging expanded Fair Credit Reporting Act regulated data and advanced analytics,” said Greg Wright, Chief Product Officer and Executive Vice President at Experian Consumer Information Services. “Yet, as an industry, we can and must do better to ensure more consumers can access financial services at affordable rates. While the findings show we are moving in the right direction, financial access depends on complete industry adoption of new data and insights as well as business practices that proactively address the historical gap that’s existed in serving more consumers.”

Access to fair and affordable credit can help consumers get a college degree, buy a car or home, start or expand a business and ultimately help establish careers, build wealth and achieve greater financial success. Yet, in Financial Inclusion and Access to Credit, Experian and Oliver Wyman find 42 percent of the adult population lacks a conventional credit score in the range that would typically enable access to credit at mainstream 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 credit invisible and 21 million who are unscoreable. An additional 57 million have subprime or below credit scores
• Credit invisibility more frequently impacts underserved communities with 26% of Hispanic consumers and 28% of Black consumers unscoreable or invisible compared to 16% of White and Asian consumers
• Credit invisibility often impacts younger consumers, with 40% of credit invisibles in the United States under 25
• Immigrants and consumers from low-income neighborhoods are more likely to face barriers in accessing mainstream financial services

The report shows lenders can expand access to credit for currently underserved consumers by increasing the number of consumers they can assess and by improving their ability to identify the true credit quality of borrowers. Leveraging expanded data, or nontraditional credit data, and advanced analytics can help lenders achieve both.

According to Experian’s research, when advanced analytics and machine learning are combined with expanded data sets as they are with Experian’s Lift Premium™ score, 96 percent of applicants can be scored, including an estimated 65 percent of the credit invisible population and the entire conventionally unscoreable population. This is significantly greater than the 81 percent of consumers that can be scored by conventional scores. In addition, 6 million consumers whose conventional scores are subprime could be upgraded to near-prime or above based on the expanded data used in the score.

“Now is the time to begin leveraging sophisticated tools like Experian Lift Premium™ to ensure all consumers can get the credit they deserve,” added Wright.

The report also points to increased opportunities to further drive financial inclusion with expanded data sets, including utility payments, rental payments, consumer permissioned data and bank account data. One example noted is Experian Boost™. Since launching in 2019, nearly 9 million consumers have enrolled in Experian Boost to improve their credit scores by adding their on-time cell phone, utility and video streaming service payments directly to their Experian credit file¹.

Lenders increasingly can utilize not only their own relationship banking data, but consumer-permissioned data from other financial accounts to improve their credit decisions. The use of consumer-permissioned data in underwriting, once the exclusive province of fintech disruptors, is expanding among mainstream lenders.

“Responsibly expanding access to credit is both an untapped business opportunity, and a chance to have 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 complete report, please visit: https://us-go.experian.com/driving-growth-with-greater-credit-access-white-paper?cmpid=pr-release

About Experian

Experian is the world’s leading global information services company. During life’s big moments — from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers — we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organizations to prevent identity fraud and crime.

We have 20,000 people operating across 44 countries, and every day we’re investing in new technologies, talented people and innovation to help all our clients maximize every opportunity. We are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index.

Learn more at www.experianplc.com or visit our global content hub at our global news blog for the latest news and insights from the Group.

Experian and the Experian trademarks used herein are trademarks or registered trademarks of Experian and its affiliates. Other product and company names mentioned herein are the property of their respective owners.

About Oliver 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 organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.

¹ Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220112005355/en/

Amanda Garofalo

Experian Public Relations

1 714 460 3739

amanda.garofalo@experian.com

Source: Experian

FAQ

What does the new Experian research reveal about credit access in the U.S.?

The research shows that nearly 106 million U.S. consumers struggle to secure credit due to being credit invisible or holding subprime scores.

How can lenders improve credit access according to Experian?

Lenders can utilize expanded data sets and advanced analytics to score 96% of applicants, improving access for many currently underserved consumers.

What is the impact of credit invisibility on different demographics?

The research indicates that credit invisibility significantly affects underserved communities, with higher rates for Hispanic (26%) and Black consumers (28%).

What is the potential market opportunity highlighted by Experian's findings?

With 42% of adults lacking a conventional credit score, there is a major opportunity for lenders that adopt new data practices.