Diving for Data:

How Alternative Credit Data Provides

Lift in Your Portfolio.

September 25, 2018

© 2018 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.
 Our Conversation Today

• Introductions
• Alternative credit data overview
• Hit-rate analysis and data performance
• Account review use case
• Q&A

2 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Introductions

Paul DeSaulniers Crissy Wallace

Sr. Director, Product Management Data Analytics Consultant

Experience: 20 yrs. in Banking and FinTech Experience: 18 yrs. in U.S. credit and
Responsibility: database management

• Head of product for Scoring, Alternative Responsibility:

Data & Collections at Experian. • Leading complex market research with a
• Quoted in industry-leading publications focus on economic research
such as PYMNTS and Time. • Monitoring U. S. credit and the
• Frequent presenter at industry events macroeconomic climate
such as CUNA, Experian’s Credit Union • Provides client consultation for analytical
Advisory Council, LendIt and Money engagements, including proof of concept
20/20. tests, model score validation, product
development, portfolio profiling, risk and
trend analysis.

3 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Alternative Credit Data Overview

Alternative Credit Data

Overview

4 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 The Riddle of Alternative Credit Data

59% Thick 5 or more trades

25% Thin 1-4 trades

over How do we
77% 18 years
7% No Hit Data other than trades effectively score
321 Million 100%
U.S. Population 9% Invisible No record of credit

of consumers?
under
23% 18 years Primary Credit Report
Data Sources
Tradelines
Mainstream
Finance
Inquires
Deeper View of Your Consumer
Public Records
> Bankruptcy

5 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 What is Alternative Credit Data?

Traditional Credit Data Alternative Credit Data

• Tradelines • Alternative financial
‒ Credit card service data

‒ Auto loan • Rental payments

‒ Mortgage • Asset ownership

• Credit inquiry • Utility payments

• Internal records • Full file public records

‒ Bankruptcy • Consumer
permissioned data

ALL INFORMATION THAT IS FCRA-COMPLIANT

Displayable. Disputable. Correctable.
6 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 What opportunities are we striving to address with
Alternative Credit Data?

Traditional Lenders: Adjacent Players:

• Strengthen & expand portfolios Consumers • Enter markets via new business
• models (e.g. Fintech)
Increase & sustain competitive ▪ Increased access to
advantage affordable financing • Grow in underserved segments
• (e.g. Alternative Finance)
Improve customer experience ▪ Speed / ease / convenience
• Differentiate data assets &
▪ Build credit
engage consumers (e.g.
Information Services)

7 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 How alternative data sources relates to consumer credit
worthiness

• Rental data
• Address history
• Expanded Internal
records Ability
The traditional Stability to repay
credit profile data
was developed to
assess a consumers
credit worthiness
• Rental data
• AFS data
Willingness • Cash flow
• AFS data to repay • Expanded Internal
• Bill payment records
• Subscription data • Education data

8 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Experian’s pursuit of alternative credit data

Increases ability to predict consumers’

Working capacity and willingness to repay

criteria for Not historically or consistently reported

to national credit bureaus
alternative
Can be effectively and compliantly
credit data operationalized and scaled

Key Experian milestones

Full-file public Consumer Alternative financial
Rental history
records permissioned services

Acquired Launched Extended Partnered with Acquired

RentBureau® ViewSM Score Finicity Clarity Services

9 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Rental data

Summary: Value:
Risk
• Experian’s RentBureau® is the largest U.S. score
rental payment database change

• Data on 19 million residents from over 1,200

data furnishers (e.g., property managers,
rental collections agencies, payment
processors)
• Includes both positive and negative Build your credit
data (lease terms, on-time payments, You’re managing
late payments / not sufficient funds) many types of credit
lines, but you may be
missing out on adding
rent payments to your
credit report
Report your rent now

10 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Expanded public records

Experian’s Extended ViewSM score leverages Value: Extended ViewSM adds ~10% lift in
public records to score ‘thin-file’ and ‘no-hit’ evaluating credit worthiness for thin-file consumers
consumers
• Information in a consumer’s public record that is
located at the state and local level
• Property and assets
• Address stability
• Education
• Identity verification
• Risk factors
• Professional licensure
• Aggregated and managed in an FCRA compliant
data warehouse

11 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Account aggregation

Experian’s Transaction Services leverage user- Value:

permissioned account aggregation to expand
and accelerate decisioning Increase efficiency – Mortgage loan cost per day
• Facilitates real-time access of consumer and commercial to close is $126. Reduce verification costs for
bank data at the transaction level. Assets and Income by up to $756

• Users permission access to their bank, brokerage Minimize risk – Mortgage fraud related to Income
and 401k accounts; 95% of all U.S.-based checking and Assets is up 16.9% from 2016 to 2017
accounts can be accessed Aggregation based verification directly from banks
• Verify eliminates paper based fraud
• Account ownership
Personalize experiences – Consumers expect
• Frequency of deposits and withdrawals quick and easy access to credit
• Direct deposit income and individual transactions
• Reports are FCRA compliant and can be used in Unlock intelligence – To remain competitive with
underwriting decisions as well as for simple verifications shift toward increased automation and digitization
of income, assets and cash flow

12 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Alternative financial services

Summary:
• Experian’s Clarity is largest U.S. specialty
credit bureau
• Primarily serving non-prime population
and lenders
• 60+ million consumers on-file
• Includes both positive and negative loan
payment data
• Real-time credit reporting
• Founded 2008
• 100 employees; Clearwater, FL

13 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Experian Alternative Credit Data

API Management API Management

Experian clients and Gateway and Gateway

Online
File OneSM
Batch Trade line / inquiry /
public record
Mobile apps
Data Platform
Web apps
Consumer
Clarity
Business / Permissioned
partner apps
Internal apps Additional
(Experian) RentBureau®
FCRA assets

14 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Alternative credit data is unique & additive

National • 1 open auto loan Thin credit file gives little insight into
Credit Bureau • 2 credit cards credit risk.

• 2 open trades Adding Clarity data provides significant

Clarity • 5 closed trades paid in full positive information on performance on
• 3 inquiries in 90 days
Specialty Bureau alternative finance trades not available
• 2 bank accounts last 12 months
on traditional credit file.
• 1 move in last 2 years

• 750 EVS score Extended View Score indicates low

Extended
• Attended 4 year college risk with supplemental information on
View Score
• Profession: registered nurse education and profession.

RentBureau • 1 open and current rent trade RentBureau shows one open and current
• No derogatory rental history rental trade with no derogatory information.

Finicity • Verified income: $ 5,127 Finicity confirms income and assets with
• Verified assets: $16,944 consumer permission.

15 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
16 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
17 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
18 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
19 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
20 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
21 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Summary of Alternative Credit Data Whitepaper Findings

Alternative finance
consumers tend to be
much younger, on
average, than the U.S.
population on File One.

60%

of lenders report that they decline more

than 5% of applications because they have
insufficient information to make a
loan decision
22 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Alternative Credit Data Overview

Hit rate analysis

and data performance
Deep Dive: Auto, Bankcard,
and Personal Loan Samples

23 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Hit rate analysis methodology

Open trades Dec 2016 Full Clarity

Performance Dec 2017 consumer file

Hit Rate Analysis

(consumers with Clarity hit)

24 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 VantageScore® 3.0
Model Overview

The score used as primary comparison for

traditional bureau performance A = Super-prime 781–850
• Predicts risk of borrower
o Likelihood of future serious delinquencies B = Prime 661–780
(90 days later or greater)
o Any type of account
C =Near prime 601–660
• 24–month performance
• Score range of 300–850
o Higher scores represent a lower likelihood of risk D = Sub-prime 500–600
o Lower scores are higher risk

F = Deep sub-prime 300–499

25 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 There are several ways to use alternative credit data

Suppression Criteria

Score

26 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing auto hit rates
Alt
Finance Overall Hit Rates:
15% Percentage of consumers in each score band that have alternative
finance data

15%
of consumers with an 61%
auto trade matched to
Clarity alternative
No Alt Finance
finance data
85%
50%

44%

37%
Average VantageScore®
704 717
28%
627 26% 23%

9%

3%
5% 4%
0%
Overall Hits No Hit Super Prime Prime Near Prime Subprime Deep Subprime Exclusion

27 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing auto consumers with alt finance presence are more
likely to be 90+ DPD in the first 12 months
Auto 90+ Bad Rate
by VantageScore V3 Band
18%

16%
433% more 15.5%
likely to go
14%
90+ DPD
12% 11.5%

10%
8.5%
8%

6% 4.8% 4.8%
4% 2.9%
2% 1.4%
0.90% 0.7%
0.1% 0.1% 0.3%
0%
Total Super Prime Prime Near Prime Subprime Deep Subprime
Clarity Hit Clarity No Hit

28 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing bankcard hit rates
Alt
Finance Overall Hit Rates:
10% Percentage of consumers in each score band that have alternative
finance data

10%
of consumers with a
bankcard trade matched 58%
to Clarity alternative
No Alt Finance
finance data
90%

39%
40% 39%
Average VantageScore®
736 745
656

20%

13%
8%
7% 4%
3%

0% 0%
Overall Hits No Hit Super Prime Prime Near Prime Subprime Deep Subprime Exclusion

29 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing bankcard consumers with alt finance presence are
more likely to be 90+ in the first 12 months

Bankcard 90+ Bad Rate

by VantageScore V3 Band
40%
36.4%
573% more
35%
likely to go
29.7%
30% 90+ DPD
25%

20%
16.8%
15%
10.4%
10% 7.4%
5.5%
5% 3.0%
1.10% 0.1% 0.0% 1.0% 0.4%
0%
Total Super Prime Prime Near Prime Subprime Deep Subprime
Clarity Hit Clarity No Hit

30 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing personal loan trade hit rate
Overall Hit Rates:
Alt Percentage of consumers in each score band that have alternative
Finance finance data

24% 24%

of consumers with a 70%

personal loan trade
matched to Clarity
alternative finance data No Alt
Finance
76%
53%

43%
Average VantageScore®

673 692 31%

612
25%

19%
12%
12%

3%
0%
1% 0%
Overall Hits No Hit Super Prime Prime Near Prime Subprime Deep Subprime Exclusion

31 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Existing personal loan consumers with alt finance presence
are more likely to be 90+ in the first 12 months

Personal Loan
90+ Rate
30%
315% more 25.1%
25% likely to go
90+ DPD
20% 18.6%

15%
11.3%
10%
7.5% 6.9%
4.5%
5%
1.80% 2.5%
1.6%
0.2% 0.1% 0.6%
0%
Total Super Prime Prime Near Prime Subprime Deep Subprime
Clarity Hit Clarity No Hit

32 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 The added value of Clear Early Risk ScoreTM

What is in it? What does it do?

Premier Attributes, Predicts short-term risk:
Clarity Attributes, 90+ DPD on first 12
Score range of months of traditional
300-850 bureau trade

Is it FCRA? Does it replace

Yes, output includes VantageScore?
score, 4 adverse action
reasons, 5th factor when No, it supplements
inquiries are present traditional risk scores

33 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 The power of adding
alternative credit data
40% Near prime population
Cumulative % of Bad Accounts

35%

30%

25% With a traditional risk score you can approve

10% of the population inside your risk criteria
20%
By adding AFS data you can approve 16% of
15%
the population inside the same risk criteria 60%
10% lift in performance
5%

0%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Top % of Score

Clear Early Risk Score VantageScore 3.0 Baseline

34 ©Experian 9/25/2018 Experian Public

 Clear Early Risk Score helps identify bankcard opportunities
by layering on additional knowledge about consumer
performance

Swap out strategies:

Consumers bucketed as
prime, with worse
performance rates than
average

Swap in strategies:
Consumers bucketed as
near prime/subprime,
with better performance
rates than average

Top: Bad Rate

Bottom: Percent of trades

35 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Utilizing Clarity data to refine
account management strategies

Collection Improve
Line strategies
strategies cross-sell

Trigger new Custom

Offer education
inquiries modeling

Loss
Forecasting

36 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Loss Forecasting with Alternative Finance Data

37 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Takeaways

1 Alternative credit data is being used by traditional and alternative lenders

2 Can be used to gain a deeper view of the consumer (current and prospective)

3 Alternative credit data is supplemental and essential

4 FCRA-compliant and can be used for adverse action

38 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Questions?

Paul DeSaulniers Crissy Wallace

Sr. Director, Product Management Data Analytics Consultant

39 ©Experian Experian Public September 2018 Diving for Data – How Alternative Credit Data Provides Lift in Your Portfolio.
 Thank you!

© 2018 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.