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©2015 Experian Information Solutions, Inc. All rights reserved. Experian and the Experian marks used herein are trademarks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public.
The positive impact of utility credit reporting
May 20, 2015
This presentation is streaming audio, which can be heard over computer speakers. There is no dial-in number for this Webinar.
2©2015 Experian Information Solutions, Inc. All rights reserved.Experian Public.
The positive impact of utility credit reportingSpeakers
Chris Magnotti, Analytical Consultant, ExperianChris Magnotti is an analytical consultant for CIS Analytics within Experian’s Decision Sciences group. In this role, he provides the marketing and sales organizations with customized analytic support. Scope includes analytic product support and development, full file trade line reporting, recovery and collection study, credit trends, and custom solutions. Chris is an industry expert, who is also a regular speaker at industry conferences.
Chris has 19 years of experience in disciplines including: analytics; acquisitions; account management; fraud; collections; P&L forecasting; portfolio stress testing; portfolio acquisition; due diligence; international risk assessment; merge and acquisitions; junk bond evaluation; database development. Chris’s past experiences include working for a Top-5 portfolio in each of the following industries; bankcard, subprime bankcard and private label. Chris holds a Bachelor degree in Environmental Science from the University of Delaware.
Ashley Knight, Product Management, ExperianAshley Knight is part of Experian’s Consumer Information Services and is the Product Manager for Data Integrity Services. She is responsible for the ongoing management, product development, and marketing of Data Integrity Services and works closely with internal Sales teams, Data Providers, and Consulting groups to deliver on and to enhance the product suite. Ashley joined Experian in March 2014 and has 12 years of experience in the financial services industry. She was most recently with Santander Bank as Vice President of Product Management. Prior to that Ashley was with Citizens Bank as Product Manager for the consumer checking portfolio and has also held roles in finance, marketing, and underwriting.
Ashley has a bachelor's degree in Marketing from Roger Williams University in Rhode Island and currently resides in Newport Beach, California.
3©2015 Experian Information Solutions, Inc. All rights reserved.Experian Public.
Credit reporting and the consumer
Background What is credit history?
What is VantageScore® 3.0?
Key terms and segment definitions
What is alternative data?
How we added the new trade data
Results Impacts to file thickness, risk
segment and score migration
Modeled bankcard interest rate
Financial impact to data reporter
Support Experian is our partner
Experian Data Integrity Services
Why furnish data?
Our investment into data quality
The positive impact of utility credit reportingAgenda
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Credit reporting
and the consumer The positive impact of
utility credit reporting
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The positive impact of utility credit reportingRegulatory agency’s viewpoint
One possible way to help consumers build or strengthen their credit profiles is for credit reporting agencies to incorporate additional, alternative data such as regular telecom and rental payments.
— Empowering Low Income and Economically Vulnerable Consumers, CFPB November 2013 report
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The positive impact of utility credit reportingIndependent research viewpoint
A non-partisan, non-profit policy research and development institute devoted to increasing financial inclusion using information solutions
Mainstream lenders can use ‘alternative’ or ‘non-traditional’ data, including payment obligations such as rent, gas, electric, insurance and other recurring obligations, to evaluate the risk profile of a potential borrower.
— Give Credit where Credit is Due, PERC December 2006 publication
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Legislative branch Bipartisan support of ‘Credit Access and
Inclusion Act’ to encourage utility companies to report positive payment history
An effective and immediate way to help underserved consumers build or restore their credit
Executive branch CFPB research efforts, interested in fairness
Treasury supportive of alternative data use
White House has shown interest in learning the impacts of adding subsidized rental housing data, interests are expanding
The positive impact of utility credit reportingPublic sector efforts to encourage full file reporting
Alternative data is key to fulfilling government sound lending regulations (Card Act, Reg. Z, Dodd-Frank), without unduly harming consumers and the economy
8©2015 Experian Information Solutions, Inc. All rights reserved.Experian Public.
Organizations should consider that in light of the regulated environment, reporting accurate and complete credit data has significant benefits to the consumer
Our joint obligation is to create a healthy credit eco system and support the choices consumers make as part of their financial journey
The positive impact of utility credit reportingOur obligation
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The positive impact of utility credit reportingCFPB quote
Most decisions to grant credit – including mortgage loans, auto loans, credit cards, and private student loans – include information contained in credit reports as part of the lending decision. These reports are also used in other spheres of decision-making, including eligibility for rental housing, setting premiums for auto and homeowners insurance in some states, or determining whether to hire an applicant for a job.
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— Consumer Financial Protection Bureau, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012
Credit reports play an increasingly important role in the lives of American consumers…
— Consumer Financial Protection Bureau, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012
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The positive impact of utility credit reportingConsumer benefits
Educated consumersThrough financial literacy and access to their credit file, consumers may better understand their credit report and dispute less
Customer disputesConsumer will be less likely to dispute when there is complete and accurate data
Accurate credit scoreIncomplete or missing data may have an impact to score, or result in no score at all
TransparencyGreater detail and completeness allows consumers to evaluate mistakes of the past to correct going forward and become more desirable to a lender
Expanded and lower cost credit offeringsConsumers may obtain better interest rates and pay lower fees. Absence of credit may deem customer as ‘high-risk’ and limit offers
Customer experienceLenders can offer a relevant, meaningful conversation and experience with the consumer
Non-credit needsConsumer can provide Credit report for job or rental application
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CONSUMER
60%of the Society for Resource Management’s member employers used credit reports to screen applicants for at least some of their positions
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Background
The positive impact of utility credit reporting
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The positive impact of utility credit reportingWhat is credit history?
Trades are the unique debt obligation of that consumer
Trade information maintained is:
► Balance
► Available credit line
► Repayment history
► Issuer
Common types of credit include: credit cards, mortgages, car loans, utility services and more
You credit report serves as your financial history reference
13©2015 Experian Information Solutions, Inc. All rights reserved.Experian Public.
The positive impact of utility credit reportingWhat is VantageScore® 3.0?
VantageScore® is a superior credit risk model that dramatically increases the number of scoreable consumers, captures a broad and recent set of consumer behaviors, and generates more consistent credit scores across all three credit reporting agencies
VantageScore® 3.0 is a highly predictive, consistent credit risk score that lenders can use across the credit life cycle to make more informed credit risk decisions
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The positive impact of utility credit reportingKey terms and segment definitions
Risk segmentScore exclusions Cannot be scored using traditional scoring methods
Sub prime Weak credit history and reduced payment capability
Non (near) prime Challenged credit history, access to credit offers
Prime Most credit worthy and access to best credit offers
File thicknessNo hit Not found in Experian’s credit database
Thin Consumer with less than 5 trades on credit database
Thick Consumer 5+ trades on credit database
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The positive impact of utility credit reportingWhat is reported today from alternative data?
Credit reporting agencies(Experian, Equifax, Trans Union)
Severely delinquent, NEGATIVE consumer data (i.e., write-offs, etc.)
Wireless communication
Medicalpaymentobligations
Rentalhousing
Traditional utility
What about on-time payment obligations, the consumer’s positive data?
What is missing?
Today
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Consumer trade data
Currentscenario
Final score VantageScore®
Scorelogic
The positive impact of utility credit reportingAnalysis design and how we added the new trade data
Score models leveraging the additional trade data, in their development, would become more predictive and have better insight on the consumer
Consumer trade data
Alternative tradeCurrent account status
Simulation Final score VantageScore®
Scorelogic
Each industry example will have one additional trade added to the consumer’s credit file except for Medical where up to five additional trades could have been added to their file
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ResultsCurrent account statuses only
The positive impact of utility credit reporting
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The Positive Impact of Utility Credit ReportingFile thickness (no-hit / thin / thick) and the impact of adding the new trade data
Energy utility
No hit Thin Thick0%
20%
40%
60%
80%
45%
55%
36%
64%
Before trade added After trade added
Decreased 20%
Increased 20%
Missing no hits because pulled from credit file
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The positive impact of utility credit reportingVantageScore® risk segment migration and the impact of adding the new trade data
Energy utility
Score exclusions Subprime Non-prime Prime0%
10%
20%
30%
40%
50%
60%
70%
3%
30%
13%
54%
2%17% 20%
62%
Before trade added After trade added
Decreased 33%
Increased 15%
Decreased 43%
Increased 54%
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The positive impact of utility credit reportingVantageScore® change and the impact of adding the new trade data
Energy utility
-11+ -1 to -10 0 1 to 10 11+0%
10%
20%
30%
40%
50%
1.8% 1.4%
21%
31%
46%Insignificant change*
*Experian has determined that a score change greater than 2% would constitute a significant change to bad rates
Score change = After score – Before score
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The positive impact of utility credit reportingVantageScore® change and the impact of adding the new trade data
Energy utility
-11+ -1 to -10 0 1 to 10 11+0%
20%
40%
60%
80%
100%
1.8% 1.4%
21%31%
46%
Total
Prime
Non-prime
Subprime
Insignificant change*
*Experian has determined that a score change greater than 2% would constitute a significant change to bad rates
Score change = After score – Before score
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The positive impact of utility credit reportingFinancial impact to data reporter and potential credit loss savings
Subprime Near prime Prime0%
5%
10%
15%
20%
25%
Modeled interest rate % for credit card
Near prime example:
Interest APR = 17.5%
$1,250 interest per year
Primeexample:
Interest APR = 10.99%
$778 interest per year
$472 interest savings per year!More money in the consumer’s pockets to pay back debts
Average credit card balance for low / moderate income in 2012:
$7,145** 2012 National Survey on Credit Card Debt of Low and Moderate Income households
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The positive impact of utility credit reportingFinancial impact to data reporter 60+ DPD rates by quarter
Energy utility
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q10%
2%
4%
6%
8%
10%
12%60+ DPD
2006 2007 2008 2009 2010 2011 2012 2013 2014
Started full file reporting
40% drop in 60+ DPD
Lower delinquency rates = Lower losses
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Support
The positive impact of utility credit reporting
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The positive impact of utility credit reportingWhere Experian is prepared to help and support data reporting
Support
Resources
Research
IT support for file conversion Secure data transfer Data quality
Data reporting guidebook NCAC – Dispute support Pre-reporting analysis
Internal case studies PERC supporter
Experianis your partner throughout the process
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The positive impact of utility credit reportingData quality
Data Integrity Services
Metric Report DataArc Packages
Our packages offer a comprehensive solution and methodology for assessing data quality with focus on Metro 2 reporting and disputes
Obtain advanced analytics and peer benchmarking to produce information that is both insightful and actionable
Automated reporting tools help to monitor and correct rejected accounts
To help drive a positive customer experience for consumers and ensure maximum accuracy of consumer credit, we have created Experian Data Integrity Services
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Experian is committed to ensuring the integrity of data throughout the entire data life cycle and continues to build our repository of consumer credit information
► Experian obtains consumer credit information from over 13,000 data furnishers
► Data furnishers contribute 4.2 billion trades to our database
Furnishing credit data to Experian, benefits both clients and consumers
The positive impact of utility credit reportingWhy furnish data?
Consumer credit report
Establish payment history Increase tradeline
thickness Opportunity to improve
score Reduce ‘unscorable’
consumers
Customer experience
Potentially provide score and create consumer awareness
Establish payment history Positive customer
experience through validation of data quality
Data furnisher
Validate accuracy of on-file data and submissions
Fewer delinquencies and / or charged-off accounts
Broaden sales opportunities
Brand recognition
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The positive impact of utility credit reporting Our investment into data quality
Experian is staying ahead of the curve We have invested in technology and resources to deliver quality data reporting and analysis through Experian Data Integrity Services
Our tools can help to monitor and validate the accuracy of Metro 2 submissions to create a positive customer experience while remaining compliant
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Download: New Experian perspective paper
“The Impact of Consumer Data Reporting” at http://www.experian.com/consumerimpact
New Experian white paper“Let There be Light” athttp://www.experian.com/utlities
Visit: Data Integrity Services Website at
http://www.experian.com/dataintegrityservices
CFPB Website at http://www.consumerfinance.gov/
The positive impact of utility credit reporting Resources
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Questions
The positive impact of utility credit reporting
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