Experian has taken a significant step into the realm of open banking with the introduction of a new product that allows Americans to share their transaction data, enabling the creation of a ‘Cashflow Score.’ This innovative tool aids firms in making informed credit decisions.
Currently, about 20% of Americans lack a traditional credit score, which can complicate their ability to obtain credit. However, since the majority of individuals in the U.S. hold bank accounts, Experian highlights that insights derived from cash flow can serve as effective indicators of credit risk.
The Cashflow Score offers lenders an enhanced perspective on an applicant’s financial behavior, including aspects such as income, expenses, and cash reserves. This score can complement traditional credit ratings or stand alone for individuals with minimal or no credit history.
Experian utilizes consumer-permissioned transaction data from its clients to derive this score. Acting as a technical service provider, Experian categorizes the data and calculates various attributes to generate a score ranging from 300 to 850. This score is instrumental in the decision-making process for credit cards, personal loans, and auto loans.
Scott Brown, Group President of Experian Financial and Marketing Services, stated, “We envision a future where the potential of credit data is enhanced with cash flow insights to improve decision-making and integrate more consumers—particularly those who have been historically underserved—into the financial landscape.”
He emphasized the company’s dedication to leveraging its extensive experience in data and analytics to offer innovative and user-friendly open banking solutions, ultimately creating new opportunities for consumers.