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Key insight: Experian combines credit, cashflow, trended, and alternative data into one underwriting score.
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Expert quote: Experian’s Scott Brown suggests the model lets lenders “say yes” more often.
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Supporting data: Early tests show roughly 40% predictive accuracy improvement over conventional credit models.
Bullets generated by AI with editorial review
Experian is consolidating its various forms of consumer credit risk data into a new single-score model for underwriters.
The credit reporting bureau now brings four types of consumer financial information — traditional credit, alternative credit, trended data and cashflow data — into a single score called Experian Credit + Cashflow, available upon request to lenders.
The new type of score, announced on Monday, is Experian’s most advanced credit decisioning model, according to the company. It ranges from 300 to 850, mirroring the span of a traditional FICO score, and is currently available in an early access version for testing by interested lenders.
“Leveraging Experian’s world-class data with information about how a consumer is managing their finances through open banking is the future of underwriting,” said Scott Brown, group president of financial and marketing services for Experian North America.
According to the company, early internal analysis of the new scoring model improved predictive accuracy by about 40% when compared to conventional credit models.
“Our goal is to enable our clients to choose the scoring approach that best fits their strategies,” Brown told American Banker. “[Lenders] can use the Experian Credit + Cashflow Score as their primary score for credit decisions, if they choose.”
According to Brown, the new score brings together credit data and real-time bank transaction data, which the company currently uses for its Cashflow Score and Cashflow Attributes products. Previously, each category of consumer financial data had its own separate score that lenders could individually access upon request.
“It’s important to note that credit scores are only as predictive and relevant as the data that powers them,” Brown said. “Experian’s quality and breadth of data is unmatched and crucial to powering the entire credit ecosystem.”
Experian also partnered with the data aggregator Plaid earlier this year for its Cashflow Score product. However, the new Credit + Cashflow Score is aggregator and data-source agnostic and does not use Plaid data, according to the company. Instead, Experian used its own proprietary data assets to develop the scoring model.
“Our intent is to provide our clients with flexible options for obtaining consumer-permissioned banking information when leveraging the Experian Credit + Cashflow Score,” Brown said.
Experian declined to comment on how the bureau’s scores could be impacted by banks charging fees for open banking data.
In addition to Experian’s traditional credit data and consumer-permissioned cash flow information, the new Credit + Cashflow Score includes alternative data from the credit reporter’s alternative financial services bureau known as Experian Clarity Services. The data includes reporting on tens of millions of consumers who use non-traditional financial services such as small-dollar loans or rent-to-own payments and may not have traditional credit histories, according to Brown.
“By merging traditional credit data, cash flow and these alternative data assets into a singular score, we’re helping lenders unlock a more complete and accurate understanding of consumer creditworthiness, enhancing predictive performance by over 40% when compared to conventional credit scores,” he said. “Ultimately, we’re enabling lenders to say ‘yes’ when they otherwise couldn’t or wouldn’t.”
Paul Schaus, founder and CEO of bank consulting firm CCG Catalyst, anticipates that the new credit score option from Experian will take some time to be generally adopted by most lenders.
“I don’t believe it’s poised to replace the traditional FICO score in underwriting anytime soon,” Schaus told American Banker. “Change moves slowly in this industry and FICO remains deeply entrenched as the industry standard, especially in sectors like mortgages and auto lending, due to its long track record and regulatory familiarity.”
However, Schaus sees potential for the new scoring model to supplement lending decisions for individuals who aren’t as well-served by traditional credit scoring models.
“If we look at the recent criticism of FICO’s pricing changes, the credit plus cashflow score is an appealing option for lenders who want more data on thin-file or non-traditional consumers,” he said. “It could gain traction faster if open banking adoption accelerates and lenders prioritize cost-effective, data-rich models like this one.”
Schaus noted that about 20 years ago the three main credit bureaus, Experian, Equifax and TransUnion, developed a thin-file and trend data-based scoring model called VantageScore. VantageScore announced that it would include opt-in aggregated bank account data in May 2024.
The fintech Finicity (since acquired by MasterCard) also partnered with FICO to launch the cash flow data-powered UltraFICO score back in 2018. Other companies that analyze bank account or cash-flow data alongside other forms of credit data include Nova Credit, TomoCredit and Bloom Credit.
“Experian’s credit plus cashflow score is similar to VantageScore but deeper, with real-time banking data integration and predictive insights for specific lender needs,” he said.
Schaus anticipates that a widespread replacement of traditional FICO-based credit scores with newer credit and cashflow-combined scoring models is unlikely, but shifts could be seen towards alternative scoring models in the next two to five years “if testing proves successful and regulatory environments evolve to favor alternative data.”
“My bet is it is complementary to FICO and/or VantageScore in a hybrid decisioning framework,” he said.
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