Consumers invisible to banks thanks to the enigmatic American credit reporting system have a new tool at their disposal: Experian, one of the three major credit bureaus, is launching a new program that will allow consumers to simply create their own credit reports from scratch, the the wall street journal reports.
The program, called Go, will involve customers linking “non-debt-related recurring bills” (think mobile phone payments, utility bills or even bank accounts in general) to provide the basis on which to establish a score. credit. The process aims to move consumers from invisible to banks to a credit report and an increased chance of loan approval. From 2018 and 2019, Experian and other credit reporting agencies began allowing consumers who already had credit reports to improve their scores by adding additional information of their choosing, primarily the above items, such as utility payments and phone bills. Experian said last year that this pivot has collectively added an additional 50 million points to Americans’ credit scores over the past three years.
This makes Experian the first credit bureau to enable the use of daily cash data as an on-ramp for building credit. The Consumer Financial Protection Bureau (CFPB) estimates it’s a hurdle for more than 25 million “credit-blind” Americans. This is a group that struggles to get credit scores, and it includes everyone from recent college graduates and people who intentionally avoid credit cards, to immigrants and even many black and Hispanic adults. To get a loan, you must have a good credit rating. But to have a good credit rating, you need proof that you can repay the credit. This proof traditionally comes from information provided by lenders – data revealing the types of debt a consumer has requested, and how often, and whether that person is repaying it on time. Experian’s Go offers “credit-invisible” demographics a way to build a credit history, increasing their chances of getting approved for a loan.
Experian rolled out Go back in October, through a targeted pilot with around 15,000 people. It says consumers who created new Go accounts by adding debt-free accounts of their choice were able to go from no FICO score to an average of 665, which is close to the range generally considered good credit. .
But of course, the move also has a benefit for Experian: Go also gives it access to more consumer data than other credit bureaus have, making it attractive to lenders looking to purchase credit reports. and creates new leads that he can sell. which could lead to new credit card openings. This tactic of forcing additional lines of credit or financial services on customers has been controversial in the past, given the economic vulnerability of this demographic. the Newspaper says Experian plans to offer new Go credit cards to consumers that they are likely to be approved for. Among the specific cards mentioned are those from Capital One and also from a new fintech startup called Petal, which specializes in lending to consumers with limited credit histories.