Generated Title: Experian's "Credit + Cashflow Score": Is It Revolution, or Just Renaming?
Experian's new "Credit + Cashflow Score" is making waves, promising a more complete picture of a borrower's risk profile. The core idea – combining traditional credit data with consumer-permissioned banking information – isn't exactly novel. But Experian's scale and marketing muscle could give this iteration some real traction. The question is: does it actually improve risk assessment, or is it just a repackaging of existing data streams?
Digging Into the Data Streams
The press release boasts the integration of several data points: Experian's credit data (covering 220 million U.S. consumers), alternative financial services data from Clarity Services (covering "tens of millions" more), and, crucially, consumer-permissioned bank account data. This last piece includes income, balances, card payments, bank fees, and loan transactions. They're also touting trended data, offering a 24-month window into how consumers manage credit over time.
Let's break that down. The 220 million consumer figure is impressive. But how many of those consumers are actively using credit? And how many have thin or stale credit files? The Clarity Services data is interesting, as it aims to capture those outside the traditional credit system. But "tens of millions" is vague. Is it 20 million? 90 million? The difference matters. (A precise figure here would have been appreciated.)
The real potential lies in the banking data. Access to real-time income and spending patterns is a game-changer for assessing affordability. But it's permissioned. How many consumers will actually opt-in? And will it be a representative sample, or skewed towards those who know they have strong cash flow?
Experian's Scott Brown calls combining their data with open banking information "the future of underwriting." That's a bold statement. It assumes widespread consumer adoption of open banking, which is far from a certainty. It also assumes that the additional predictive power of cash flow data justifies the added complexity and potential privacy concerns.
The "Opaque" Credit Limit Problem
Experian is framing this new score as a solution to consumer confusion around credit limits. A PYMNTS Intelligence report found that nearly two-thirds of consumers have little understanding of how issuers decide on credit limit increases. And a third feel that at least one decision in the past three years was unfair (jumping to almost 60% among subprime borrowers).
The implication is that the "Credit + Cashflow Score" will make the process more transparent and equitable. But how? Will consumers actually have access to the factors driving their score? Will lenders be required to explain their decisions in more detail? Or will it simply be a black box with a new label?
I've looked at hundreds of these product announcements, and this one feels particularly light on specifics. The claim that AI can make transactions trustworthy, as Vijay Mehta suggested last month, sounds good, but how does that translate into concrete changes for the average consumer applying for a credit line?
The UK side of Experian has also been adjusting how they score credit, now including rental payments. This is a positive step, but tenants have to opt-in for this to count, and missed rental payments will negatively affect the score. Fair enough, but how many renters will proactively take this step? Experian: Credit scores to include rental payments for first time
The new system in the UK also overhauls the scoring bands, eliminating "poor" and "very poor." While this is a welcome change, it won't affect someone's ability to get credit. It's more of a cosmetic change than a fundamental shift. (A cynic might call it marketing.)
Shareholder Value vs. Consumer Benefit
Let's not forget Experian is a publicly traded company. While the press releases focus on consumer benefits, the underlying motivation is always shareholder value. And the announcement of a share repurchase program underscores this point. Buying back 19,000 ordinary shares on the London Stock Exchange is a classic move to boost earnings per share. (The total treasury shares now sit at 56,171,865.)
TipRanks' AI Analyst, Spark, rates Experian as "Outperform," citing strong financial performance. However, they also note a "bearish trend" in technical indicators and a "high valuation." The company's focus on AI and growth in key regions is positive, but "current market conditions and valuation concerns temper the overall score."
So, where does that leave us? The "Credit + Cashflow Score" could be a significant step forward in more accurately assessing credit risk. But it depends on widespread consumer adoption, transparent implementation, and a genuine commitment to fairness, not just boosting shareholder value.
