Experian Issues an Opinion Editorial on the Three Myths Blocking the Way to Greater Financial Inclusion
July 23 2024 - 8:30AM
Business Wire
The following is an opinion editorial provided by Sandy
Anderson, Experian’s executive vice president of the data office,
operations, governance and privacy:
Amid some of the financial challenges that underserved
communities experience, members across the financial services
community remain committed to championing initiatives and programs
that drive greater financial inclusion. In fact, collaboration has
led to the inclusion of non-debt related payment information on
consumers’ credit profiles, as well as digital services that make
it easier to manage money. These efforts have helped to broaden
access to fair and affordable financial resources for more
individuals.
While significant progress has been made, there is still more
work to do. However, some of the misconceptions and myths about the
financial services community are hindering further advancement.
Debunking these myths will accelerate progress by building trust
between the financial services community and consumers.
Myth #1: “Financial institutions have no interest in
underserved consumers or credit invisibles.”
The truth is, banks and credit unions want to say “yes” to more
prospective borrowers, including individuals and families from
underserved communities. Beyond being the right thing to do, it’s
an opportunity to potentially build lifelong relationships with a
relatively untapped market. A show of good faith to communities who
have largely been ignored by the financial system could lead to
customer loyalty that may extend to their family and friends.
That’s why participants across the financial ecosystem have been
proponents of including expanded data sources—such as on-time
telecom, utility and video streaming service payments—on to
consumer credit reports, as well as exploring other Fair Credit
Reporting Act (FCRA)-regulated data sources, including payment data
on short-term small dollar loans and expanded public records data.
Making this data more accessible to lenders provides a more
comprehensive view of a consumer’s ability and willingness to repay
outstanding debt—an actionable solution to extending credit to
consumers without lenders taking on additional risk.
Myth #2: “There is a lack of trustworthy financial education
resources.”
The financial services community and affiliated organizations
recognize that empowering people with financial knowledge and
skillset are critical to consumers’ financial success. In fact,
banks and credit unions are partnering with nonprofits and
non-governmental organizations to better understand the unique
challenges and opportunities within specific communities and
provide relevant tools and resources.
For example, Experian’s B.A.L.L. for Life (Be A Legacy Leader)
program, launched in partnership with the National Urban League,
serves as a catalyst for engaging with Black communities and
low-income youth through live events and digital financial
education. Subject matter experts, professional athletes,
celebrities, and other influencers share their experiences and
expertise, covering topics such as banking, credit, financial
management and investing.
In addition, to help people improve their financial management,
Experian partners with the National Foundation for Credit
Counseling (NFCC). The NFCC connects consumers with certified
financial counselors to help them address various pain points,
including debt management, homeownership, student loans or small
business cash flow issues.
Myth #3: “Underserved communities have few opportunities to
build credit and enter the mainstream financial system.”
People from underserved communities, as well as younger
consumers and recent immigrants are often excluded from the
mainstream financial system because they lack an extensive credit
history. Historically, it’s created a vicious cycle; in order to
get credit, you have to have credit.
Fortunately, there has been a sea change in innovative solutions
to address the specific needs of these populations. These include
new credit scoring models and microfinancing which provide
financial services to individuals who may have been excluded from
traditional banking systems.
In addition, by incorporating expanded data sources, such as
telecom, utility and residential rental payments onto credit
reports, lenders have more visibility into consumers who may have
been excluded by traditional credit scoring methods. These programs
help individuals and families from underserved communities
establish and build a credit history that could enable loans, or
the ability to rent an apartment or open their dream business.
An example is Experian Boost®, a free feature that allows
Experian members to contribute their history of making utility,
cellphone, insurance, residential rent and video streaming service
payments directly into their Experian credit profile.
By incorporating nontraditional credit data like paying utility
bills on time, online banking transactions, rental payments and
verified income data, more people can establish a credit profile
that can potentially qualify them for a loan.
More Inclusion, Fewer Myths
It’s encouraging that community organizations and banks are
beginning to see the economic and social benefits of aligning on
financial literacy and inclusion. As more initiatives come online,
underserved populations will be able to establish a better
financial foundation. Then, we can declare the myths to be
history.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240723191389/en/
Jordan Takeyama Experian Public Relations 1 951
733 8768 jordan.takeyama@experian.com
Experian (LSE:EXPN)
Historical Stock Chart
From Jul 2024 to Aug 2024
Experian (LSE:EXPN)
Historical Stock Chart
From Aug 2023 to Aug 2024