Experian, FICO, and Finicity have launched a new credit score that leverages account aggregation technology and distribution capability, tapping into consumer-contributed data such as checking, savings, and money market account data, observes GlobalData, a leading data and analytics company.
A consumer grants permission to contribute information from banking statements – including the length of time accounts have been open, frequency of activity, and evidence of saving – to provide an enhanced view of positive financial behavior such as regular on-time payments.
Speaking from Money20/20, the largest fintech event globally, Heike van den Hoevel explains: “A credit score affects the type of mortgage and rate a consumer qualifies for. In many cases this restricts consumer choice, ultimately limiting the customer pool.”
According to GlobalData’s 2018 Global Retail Banking Insight Survey, 22% of US mortgage holders indicated that their current primary mortgage was the only one available to them. This proportion is even higher among younger consumers, who struggle to enter the property market – with the proportion jumping to 43% among Gen Zs and 28% among Gen Ys.
Van den Hoevel adds: “Taking into consideration a wider array of factors when assessing an individual’s credit score, such as the overdraft behavior or general level of engagement with their finances; this has the potential to further democratize lending.
“This is not only good news for the nearly one third of Americans who have a subprime credit score, but also for providers, given that a broader vetting process will provide them with a more holistic picture, thus reducing overall default risk and allowing them to extend credit to a larger risk pool.”