Experian unveiled a new credit score on Wednesday designed specifically to help the unbanked and underbanked qualify for cost-effective loans.
The credit bureau’s Extended View Score pairs data from rental agreements and public records with core credit information to generate a report for consumers with thin-to-no credit files.
Core credit data, which includes items like credit-to-utilization ratios or payment histories, will be analyzed differently than it would be if appearing on a traditional credit report.
“We’re looking at a trended view of the consumer,” Steve Wagner, president of consumer information for Experian, explains. For instance, instead of looking at whether a person has 50% of their available credit open, the Extended View Score would consider how much their basic utilization has increased over the last few months.
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Experian started including some information regarding rental payments on its traditional credit report in 2011. However, Wagner said the Extended View Score will analyze this data beyond simply whether a person’s is current on their rent. For instance, it will also consider when the rent was paid in relation to the date it was due. The bureau would not comment specifically on what public record data would be used.
Experian estimates, using its new score, 30% of consumers would have an easier time securing better rates on loans from mainstream lenders. This Extended View Score is currently only be marketed to the lending community, but the bureau may make a version available to the public down the road.
“We would very much like to provide it to the consumer, but, first, lenders have to use it,” Wagner says.
The bureau remains hopeful it can achieve mainstream adoption through existing relationships with issuers and data furnishers.
“[Bank clients] want to lend to consumers, but they want to do so responsibly,” Wagner says. “Only someone in our position can make it easy.”
According to Wagner, 15 lenders have expressed interest in using Extended View following its formal debut yesterday. He says consumers can help promote use of the product by asking lenders whether it is available as an alternative.
Even without the consumer push, the timing may be right for alternate credit score. The un-and-underbanked have become somewhat of a hot commodity with major financial institutions over the last year with American Express, BBVA Compass Bank and, most recently, Chase launching products targeted to those without traditional bank accounts.
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Image: Laineys Repertoire, via Flickr
Jeanine Skowronski Personal finance reporter and credit expert, Jeanine's work has been featured by TheStreet, Newsweek, Business Insider, Yahoo Finance, MSN, Fox Business, Forbes, CNBC and various other online publications. She has previously served as the managing editor of a small personal finance blog for Xanga.com and an editorial assistant at Maxim Fashion magazine. @JeanineSko
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Just because the Experian Extended View score was announced at the CFSI Underbanked conference, doesn’t make it a score for the underbanked. In fact, the score is very dependent upon the data provided by Experian Rent Bureau. What kind of property management companies (not landlords) do you think report renter payment history to Experian? I’m pretty sure they would have to be pretty nice apartment complexes, not the kind that many underbanked consumers would be renting. This score is really for thin file consumers. Consumers that already have some very limited credit – just not enough to be scored with Vantage.