Experian Report Shows Lenders Believe Alternative Credit Data Improves Financial Access for Consumers
Last month, Experian released its most recent State of Alternative Data report, highlighting lender and consumer awareness about leveraging alternative credit data in the wake of the COVID-19 pandemic.
“There is no question COVID-19 has created a difficult economic reality for millions of Americans,” said Greg Wright, Experian Consumer Financial Services vice president and chief product officer. “As we think about economic recovery, all of us in the financial services industry must work together to support consumers and maintain the integrity and openness of the credit market.”
The report found that 80 percent of consumers feel adding data like utility or mobile phone payment history would positively affect their credit score. 69 percent of consumers reported concern about their finances, and one in five plans to open a credit card in the next six months.
Alternative data can help consumers with limited credit histories access broader financial services. 90 percent of lenders reported that alternative credit data gives them the opportunity to expand to more consumers. 96 percent of lenders argue that using alternative credit data helps to more closely evaluate consumers’ creditworthiness.
Additionally, three out of four consumers feel they are better borrowers than what their credit score represents, and 80 percent of consumers would share alternative data with lenders for increased approval chances and better interest rates. Also, 74 percent think that lenders having access to financial data from their bank account would be more convenient than using hard copy documents.
“Incorporating alternative and consumer permissioned data attributes into decisioning processes empowers lenders to extend credit responsibly while helping consumers access the financial services they need in the current economic environment and beyond,” Wright said.