New underwriting technology developed by Experian and financial data aggregator Finicity could speed up borrowing and enable millennials and other consumers with thin or no credit files to receive money. The product emerges amid a federal call for more work on helping those potential borrowers build credit scores.
Experian said it is the first credit bureau to deploy this technology, which can enable loan approvals in as little as 10 days, down from as long as 70. The service enables lenders to “give consumers the opportunity to secure mortgages as well as other types of loans with less paperwork and hassle by connecting with financial institutions digitally,” the companies said.
Consumers complete the income and assets verification process digitally, with account data then sent to Experian’s “Decisioning as a Service” hosted platform. “This will give lenders the ability to integrate consumers’ account data into their credit decisioning processes,” the companies said. “As a result, lenders and other service providers will assess a consumer’s ability to pay and verify borrower income and assets in a manner compliant with the Fair Credit Reporting Act.”
The technology saves consumers from having to fill out reams of paperwork, and lenders will receive more financial information from potential borrowers via “real-time access to alternative data on a customer’s assets, income and ability to pay.” That will help the 25 percent of U.S. consumers—including many millennials—whom the companies said have little or no credit histories but who pay utility, rent, phone and other bills, demonstrating an ability to repay loans. Fannie Mae is testing this technology, according to the Experian and Finicity.
The Experian and Finicity partnership comes as the CFPB calls for more industry input on using alternative data to help thin- or no-file consumers build credit scores. The CFPB issued on Feb. 14 a request for information to examine the benefits and risks of using alternative data to establish credit histories, as well as examine the methods used to compile and analyze the data. Unconventional or alternative data considered to establish credit scores include timely payment of rent, utilities and mobile phone bills or deposit history into bank accounts, according to the agency.
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Image Credits: Itzik Gur