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Twenty-eight million people have no credit history, which complicates dealerships’ ability to sell them a car.
However, a new free service from Experian would allow such “credit invisibles” to generate an official credit score on the spot, according to the credit bureau.
The Experian Go initiative announced Jan. 26 creates an Experian credit report and score for no-file consumers who use the free Experian Boost program.
These reports should work for lenders that accept Experian credit scores, according to Jeff Softley, Experian president of direct-to-consumer business. To a lender, Experian Go users “look like any other consumer after they go through the process,” he told Automotive News last week.
Experian Boost, which began in 2019, has allowed nearly 9 million consumers to improve their existing credit scores by opting to provide details about cellphone, streaming, Internet or utility payments not found within traditional trade lines. It also permits more than 10,000 “unscorable” people — folks with some credit history, but not enough to produce a score — to qualify for a FICO rating each month, Experian said. Experian estimated 21 million people fall into that category.
Now, consumers without any credit history at all can contribute such data and receive an inaugural FICO score.
“And they’ll be able to do that without taking on debt,” Softley said, calling that a first.
More than 15,000 of these credit-invisible people obtained a credit report during the Experian Go pilot, which began in October.
Experian estimated the average credit-invisible person would receive an initial FICO score of 665.
The credit bureau defines prime scores as between 661 and 780. The average new-vehicle borrower held a credit score of 733 during the third quarter of 2021, the most recent Experian data available. The average used-vehicle borrower brought a 675 score to the transaction.
For 90 percent of Experian Go users who link qualifying payment data into the system, “they’re getting a credit score instantly,” according to Softley. He estimated the process could take as little as 20 to 30 minutes.
“We believe every individual deserves the opportunity to reach their fullest financial potential, and we’re proud to be the only credit bureau with a program to help credit invisibles build their credit history in minutes,” Experian North America Craig Boundy said in a statement Jan. 26.
Experian Go users will need a smartphone, a Social Security number, an ID and to have been paying the qualifying bills with a bank account that can be linked to the system, according to Softley. Experian can accept payment records from 10,000 financial institutions, Softley said. (Prepaid cards or fintech outside the realm of traditional banks can’t be captured, he said.)
“We’ve got good coverage,” he said.
The system links with the bank account to capture up to the past 24 months of payments, Softley said. At a minimum, Experian needs six months of payments to create the credit score, he said.
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