While the credit reporting industry is designed to help lenders and creditors minimize risk and assess consumers’ ability and willingness to repay outstanding debt, let’s be clear: the consumer is our main priority.
Every lending decision and action is made with the consumers’ best interest in mind. Because consumers rely on credit and other loan products to purchase homes and cars, pay for college, afford goods and services, and even bridge the gap during emergencies, the credit reporting industry has been at the forefront of broadening access to fair and affordable financial resources.
Risk-based pricing has made it possible for more consumers to access credit, particularly those with limited-to-no credit history or subprime credit profiles. Previously, lenders may have opted not to extend credit to consumers considered higher risk; but more and more, lenders are empowered to tailor borrowing terms based on a consumer’s credit history. In addition, because lenders don’t have to absorb unforeseen risk, lower borrowing costs can be maintained for all consumers.
Experian has long advocated for expanded data sources, such as rent and utilities payments, to be incorporated onto consumer credit reports and considered in lending decisions. In 2019, we launched a product that empowers consumers to add positive payment history for utilities, telecoms and video streaming services—and eventually residential rent—directly into their Experian credit report.
Our efforts coincide with legislation, such as S.2417 – the Credit Access and Inclusion Act, introduced by Senator Tim Scott (R-SC) in 2021, which encourages the reporting of consumer payment history, including rent, utilities, and telecom services, to the nationwide credit reporting agencies. This is key to broadening access to fair and affordable credit for underserved consumers.
The industry needs to continue to explore other avenues that can help consumers improve their financial health, such as the role that buy now, pay later information can play in increasing financial inclusion.
Empowering consumers to take control
Beyond legislation or the use of expanded data, many non-profit and community based organizations are championing initiatives that drive greater financial inclusion. Organizations such as Inclusiv, Jump$tart Coalition for Personal Financial Literacy, HomeFree-USA, National Urban League and the Society for Financial Education & Personal Development, among others, are helping individuals and households from underserved communities navigate the mainstream financial system and take control of their financial lives.
Experian and other financial institutions are partnering with non-profit organizations with deep roots in communities, allowing them to connect with community leaders and individuals on a more personal level. Every individual enters the credit ecosystem at a different stage so it’s important that banks and financial institutions listen to the specific challenges they’re experiencing.
For example, individuals may be searching for credit monitoring and alerts, budgeting tools or ways to put more money back into their wallets, such as finding cost-efficient options for auto insurance. Providing individuals and households with the financial knowledge and access to tools better positions them to become financially independent.
The credit reporting industry continues to provide more resources and transparency to help improve consumers’ financial health. All individuals deserve the opportunity to establish and build their credit so they are able to elevate and maintain their financial status.