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Major changes took place in U.S. credit reports in early 2022, and they promised to benefit millions of consumers.
The Wall Street Journal reported on January 25, 2022 that Experian, one of the largest credit bureaus, plans to give consumers who don’t have credit reports the ability to create their own from scratch.
American consumers typically rely on Experian and two other credit bureaus, Equifax and TransUnion, to generate their credit reports. These reports contain financial data that helps credit card issuers and other lenders determine whether a consumer’s application should be approved and what the terms, such as interest rate, will be.
Now Experian has released what you might call a DIY credit report. This new program allows consumers to manage their credit in a way they have never been able to before.
Who can benefit from a DIY credit report?
According to Experian, about 28 million American adults have no credit reports and therefore no credit scores. So-called “credit invisibility” disproportionately affects black and Hispanic adults, as well as immigrants, low-income people and those under 25, according to Experian.
Because they do not have credit reports and credit scores, these approximately 28 million people are often forced to rely on high-interest lending options such as payday loans and title loans because they are deprived of better alternatives such as traditional credit cards and loans. bank loans.
Lenders provide much of the data contained in credit reports, so invisible credit consumers often do not have enough traditional financial history to create one. Payday lenders and other lenders that this group may rely on typically do not report payment history, balances, and other account data to major credit bureaus.
In recent years, some credit bureaus and credit score providers have begun allowing consumers to self-report their payments for rent, utilities, mobile phones, and similar bills. But these efforts are aimed at boosting consumers’ credit scores, which means the data isn’t used to form the basis of a credit report.
With this in mind, you should know that Experian Go may benefit the following populations:
- “Non-banked” individuals and families who avoid traditional banking products due to lack of credit history
- Minority populations that in the past felt “closed” to the traditional banking system.
- Persons under 25 who have not yet begun to build a credit history
- Immigrants who have not yet had the opportunity to build a credit history in traditional ways
Experian Go: What you need to know
Known as Go, Experian’s new offering allows consumers to link non-debt-related recurring payments to their newly created credit reports, according to The Wall Street Journal. This allows them to build a credit history that credit card issuers and other lenders can use to determine their eligibility for a loan product.
Experian began testing the Go program in October 2021 with approximately 15,000 consumers, according to the WSJ. On average, Experian executives told the paper, consumers who added non-debt accounts to their DIY credit reports went from no credit score to a FICO 665 rating.
FICO, a major provider of credit scores, defines 665 as a fair credit score. A FICO score in the range of 670 to 739 is considered a good credit score, meaning that the chances of getting approved and receiving attractive terms for a credit card (or other loan product) are better than someone with a fair credit score.
bottom line
The Experian Go program, which aims to increase the visibility of invisible consumers of credit, could increase the chances of even more Americans getting traditional credit cards and other basic credit products.
Ultimately, this can help people pay lower interest rates and fees every time they borrow money, while building a credit history that can be useful in other areas of their lives. Luckily, Experian Go is completely free to use and open for registration.
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