The solution follows the launch of a list of products that may be used to make lending decisions, offering up to 25% lift in predictive performance compared to conventional credit scores, according to an Experian analysis of Cashflow Score.
Lenders often hesitate to extend credit to thin file or credit invisible customers, with nearly 20% of American adults not having a conventional credit score according to Experians’ research. However, most consumers in the US have a bank account, and cashflow insights are proven to be indicative of credit risk. Leveraging these insights can help lenders make more informed decisions.
While the interest in adopting banking transaction data in conjunction with credit data for lending decisions is growing, lenders may face limited analytics capabilities and resources. To tackle this challenge, Experian aims to offer intuitive, easy-to-use scoring solutions that analyse both traditional credit scores and cashflow-based data effectively.
Cashflow Score leverages consumer-permissioned transaction data provided by clients. Experian, acting as a technical service provider on behalf of its clients, categorises the transaction data and calculates attributes that are used to derive the score, which is delivered back to the lender.
Cashflow Score can be integrated into existing workflows alongside traditional credit scores, offering lenders a clearer view of an applicant’s financial behaviour, including income, expenses, cash reserves and more. It may also be used in first and second-chance credit decisions for individuals with limited or nonexistent credit histories to help improve financial access utilising only bank account data.
Experian aims to augment credit data with cashflow insights to improve decision-making and ultimately bring more customers into the financial ecosystem, including those who are traditionally underserved. The company is committed to leveraging its data and analytics expertise to offer easy-to-use Open Banking solutions to the industry.
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