Experian Targets ‘Credit Invisible’ Borrowers With Cashflow Score

Experian has launched a tool designed to increase financial access for people with limited credit history.

Cashflow Score, unveiled Tuesday (March 25), is designed to give lenders a clearer view of applicants’ financial behavior, aimed at helping people with little to no credit history improve financial access using only bank account data.

“We believe in a future where the power of credit data can be augmented with cashflow insights to enhance decisions and ultimately bring more consumers — including those who are traditionally underserved — into the financial ecosystem,” Scott Brown, group president for Experian’s financial and marketing services, said in a news release.

“We’re committed to leveraging our decades of data and analytics experience to deliver innovative and easy-to-use open-banking solutions to the industry while creating new opportunities for consumers.”

According to the release, lenders are often reluctant to offer credit to consumers who are “thin file or credit invisible consumers,” a problem when close to 20% of Americans don’t have conventional credit scores.

“However, most consumers in the U.S. have a bank account, and cashflow insights has proven to be indicative of credit risk,” Experian said in the release. “Leveraging these insights can help lenders make more informed decisions, particularly for thin file and credit invisible consumers who have a bank account.”

Experian says its solution leverages consumer-permissioned transaction data provided by its clients, scores that data based on a series of attributes, and shares that score to help lenders make decisions on things like credit cards, personal loans or auto loans.

The launch of this new tool comes at a time when borrowers with lower credit scores are having trouble improving their credit standing, as PYMNTS wrote recently.

“There’s a vicious cycle here, where banks, the traditional lenders, have found that traditional risk-scoring metrics are less adept at determining where or when to extend credit,” that report said. “That, in turn, limits the credit cards or other types of loans available to those would-be borrowers. And then, of course, without those loans or credit products in hand, with a paydown history attached to them, it becomes harder for those subprime consumers to boost their credit scores, which then improves credit access.”

Research by PYMNTS Intelligence finds that 29% of subprime consumers have applied for and been denied a credit card, as opposed to 12% of super-prime consumers.

The research also found that subprime consumers are willing – and have been trying – to find new ways to improve their credit.

“The attack is two-pronged, where these same consumers are using the credit they do have to manage how they pay for essential goods and services, and satisfy those obligations,” PYMNTS wrote.