Homeownership is a goal for many across the income spectrum; however, the goal can often feel unattainable. Rising home prices, elevated interest rates and high down payments and closing costs are significant barriers to homeownership, particularly for first-time homebuyers. We also can’t forget that historical policies and practices made it nearly impossible for minorities to buy homes in certain areas, regardless of income, prohibiting families from building generational wealth—a ripple effect that continues to impact aspiring homeowners today. While banks and other mortgage servicers offer programs to help low- and moderate-income individuals and households, including down payment assistance, these programs only scratch the surface. Homeownership is more than just a down payment and the purchase price; it’s insurance, HOA fees, maintenance and repairs, property taxes, and more. But it’s not just the financial aspect; the mortgage process itself can feel complex and overwhelming. First-time homebuyers don’t know what they don’t know. The financial services and mortgage communities have an opportunity to demystify the mortgage and homebuying processes and equip prospective homebuyers with the knowledge to better plan and prepare for homeownership. Financial knowledge is the foundation for economic empowerment Because of the stigma surrounding homeownership, many consumers don’t believe homeownership is a possibility for them. The truth is it can be, and it’s our responsibility, as an industry, to help them realize it. That means going into communities and engaging people in a direct conversation, understanding the challenges they’re experiencing, and helping them navigate them. Some of the common questions we hear include: What is a good credit score to buy a home? How do I qualify? When is a good time to buy? Knowledge is power. People welcome the opportunity to learn more about the mortgage process. Fortunately, the onus doesn’t fall on any one organization. We all play a role. For instance, at Experian, we’ve worked with programs such as HomeFree-USA’s Fast Track to Homeownership, which is designed to get renters ready for mortgage approval and homeownership. Its intermediary network oversees 53 affiliated community and faith-based housing counseling agencies across the nation. Additionally, Experian is part the Mortgage Banker Association’s CONVERGENCE Collaborative, a charitable organization designed to address the racial homeownership gap. The effort brings together various stakeholders across the mortgage industry to provide the knowledge and resources to help underserved communities achieve their homeownership goals. Financial literacy is the cornerstone of economic empowerment. Collaborating with community-based organizations, as well as non-profits, can help members of the financial services and mortgage industries more effectively reach prospective homebuyers and help them develop a game plan to achieve their financial goals. Homeownership is a pathway to financial security—but for too many, it feels out of reach. Now is the time for industry-wide collaboration to create lasting impact. Through financial literacy and equitable access to mortgage opportunities, we can build a stronger, more inclusive housing market for future generations.

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.

People rely on credit cards, personal loans, mortgages and auto loans, among other financial products to buy homes, fund college educations, weather temporary income disruptions and finance billions of daily transactions for goods and services. Credit is the cornerstone of the pursuit of our financial ambitions. That’s why the credit reporting industry is deeply committed to broadening access to fair and affordable financial resources for all consumers, particularly for individuals and households from underserved communities. The commitment is underscored by the continual effort to evolve the credit reporting system and incorporate new data sets to provide lenders a more comprehensive view of consumers’ ability and capacity to repay outstanding debt. Although progress has been made to extend credit to more prospective borrowers across the risk spectrum, if we want to continue to broaden the scope, we need to encourage the consistent reporting of additional predictive data sources to help lenders assess consumers’ creditworthiness. A proven track record but there’s more work to do Over the past century, the credit reporting industry transitioned from an opaque system founded on relationships to one rooted in data. Lenders lean on past payment history on similar loans (i.e., auto loans, mortgages, credit cards, etc.) as a reliable predictor of a borrower’s future loan payment performance—it’s a way for them to mitigate risk and say “yes” to more borrowers.   And it works. The comprehensive reporting of past loan performance, coupled with increasingly sophisticated statistical prediction models, as well as the adoption of risk-based pricing, accelerated the extension of credit to more consumers. Yet, according to research from Experian and Oliver Wyman, millions of Americans lack access to mainstream credit because they are credit invisible, unscorable or have a subprime credit score. It’s particularly challenging for younger individuals, newly arrived immigrants and historically underserved communities, such as racial and ethnic minorities. At times it can be a catch-22; in order to get credit, you have to have credit. More predictive data is key At Experian, we’ve long understood that expanding the universe of creditworthy borrowers requires more data. In addition to some of the more conventional tradelines, such as mortgages, auto loans and credit cards, we have to explore expanded data sources that are predictive of a prospective borrower’s credit risk. For instance, more consumers are using buy now, pay later (BNPL) products, and nearly every consumer makes recurring monthly payments for rent, utilities, cell phones and even video streaming services, yet oftentimes, these data points are not consistently reported to the credit reporting agencies nor considered during lending decisions. Collectively, the industry and regulators, need to do more to encourage the consistent reporting and inclusion of expanded data onto consumers’ credit reports.    In fact, based on our research, we’ve found that some of the aforementioned expanded data sources can empower lenders to assess the credit risk of a significantly larger pool of consumers. These expanded data sources have been shown to be highly accurate predictors of future loan payment behavior. And, when expanded data is combined with advanced analytics, up to 96% of the population can be scored, including an estimated 65% of credit invisibles.1 Broadening access to fair and affordable credit for more consumers means leaning into combining conventional tradelines with expanded Fair Credit Report Act-regulated data sources. The more information lenders have available to them about prospective borrowers’ past payment performance the more empowered they are to minimize risk and more confidently extend credit. Pushing for more data is the best path forward.