The ranks of thin file consumers continues to grow in this country. According to Experian these consumers now number 25% of the total U.S. population. These are people with five or fewer items in their traditional credit history.
Clarity Services is a credit bureau covering this non-prime population (you can listen to my podcast with Clarity founder Tim Ranney from last year). They have 65 million consumers in their database with a majority of these people not being covered by the traditional credit bureaus. Experian has been buying data from Clarity Services for many years but they decided last year to acquire the company.
Since the acquisition they have worked with the Clarity Services team to build a new score specifically for the non-prime segment. They are calling it the Clear Early Risk Score. As the name implies this new score is designed to give lenders a clearer view of the risk of these thin file consumers, many of whom should not be categorized as subprime.
I spoke with Alex Lintner, the president of Experian Consumer Information Services, last week to learn more about this new score and what it means for consumers.
At the same time Experian has been working on including more alternative forms of data to help expand their database to cover more people. Alex’s official comment from the press release explains why they created this score:
It’s our number one goal to improve credit access for millions of consumers. An increasing number of consumers in this country are relying on alternative finance products, and these individuals should be visible and able to build or rebuild credit with the positive payments they make. This is another step forward in our strategy to expand reach and be more inclusive. We are committed to helping create a better path for these consumers to secure affordable credit and financial opportunities.
When I asked Alex how this new score will be used in conjunction with their traditional FICO score he said it will be used in two ways:
1. When the consumer has no traditional file and therefore no credit score it will be used as an independent score.
2. The consumer may be originally scored as subprime and this new score could provide new information that may lead to a different conclusion regarding risk.
As I see it there are many millions of people who are creditworthy even if they have a thin file or no file all. The challenge is identifying the good risks from the bad risks. It makes sense that all kinds of payment history, particularly any loan payments, should be taken into account when evaluating the risk of the potential borrower.
The reality is that people are going to find credit where they can. The more we can move people away from high cost products into responsible lending products the better off consumers will be.
Now, I don’t pretend to think the new Clear Early Risk Score from Experian will be a panacea for the subprime population. But it will help identify more people who should be using lower cost credit products. This will allow the online lenders of term loan products to expand their credit box without taking on additional risk. And millions more consumers will be better off.
The promise of fintech is to expand access to credit in a responsible way. The Clear Early Risk Score from Experian is a real attempt to do just that.
A bad credit score is like a massive, apparent scar that scares people away. It’s unfortunate, since many people with low credit should have the right to build their credit score up again. Good thing there are financial institutions that help business owners get the funds they require when traditional banks fail them.
I have just recently started fixing my credit and now this new number to worry about, I have over a 600 on transunion and Equifax, and over a 500 with Experian which is way better then it was 6 months ago, and when I saw what they gave me as a score for a pre qualifying loan I almost died, what’s the use in trying when they are just going to keep coming up with ways to hold you back…
Exactly. My clarity score just was.revealed me.for the first time and ils above 750. Yet I got denied an auto loan because Clarity seems to beleive that I have attempted too many times in the last 6 months to open a NEEDED checking account. Well oh my! That is one of the problems that consumers with subprime scores and thin files. Multiple denials. Like myself, online applications frequently get denies So easily. So is thiis message now? That we should stop trying to have the basics in life because we are not equal to “Prime” applicants? Is this Clarity not intended to help more people than the other 3 credit beauros can the way things within them are sometimes cutting out too many consumers the opportunity for more in life. Apparently not. Because I have been denied for trying too hard to obtain a basic checking account about 5 or 6 months ago. And that is bullshit. How many times I apply to get what I need and I repeat what I need shoukd have no factor on an auto loan. Decision. Like I said. My Clarity score is above 750 and the highest the ramge does in the stupid system is what? 899.
Its a joke.
Sorry about my typos. Im rushing off to work to serve my community. Out of time. Thanks for reading.
I recently took out a personal loan from a company and paid it back in full. I now have an open line of credit with them.
When I recently pulled my credit report there is no history of that loan and it does not appear as available credit. I contacted the loan company and was told that they only report to “Clarity”. Finding out that Clarity is owned by Experian only infuriates me more. I have “thin” credit. I then try and improve that “thin” credit but the loan isn’t reported to any credit agency that anyone uses. It disgusts me.
Me and my wife “joint accounts” both have “thin” credit, our credit is rated good, but most of credit reporting agencies rated “C” in credit history. Our points drop down and up due one of our credit card utilization went up to 40% level, during this pandemic we use more credit card for emergency, but in 60 days we paid in full. Transunion always trend to increase our points, on jun. 06 we refinance our car loan to down interest and principal amount and points went down 40 points, reinstalled back in 60 days, but always score trend to go down if we re-finance or increase use of credit cards. My question, if our intentions good to kept credit paying excellent Why? They penalized us All the time is that under protection of the “Fair Reporting Act ” In this moment the situation is different due to Covid19, but we and other people kept paying.