EXCLUSIVE— As fintech progresses, consumers are flocking to digital services and products, which all rely on the same thing: data.

When it comes to use of such data, however, financial institutions like credit bureaus have been using the same metrics for decades, which is why some, such as Experian, are working on initiatives using “alternative data” for new credit scores. But how does it really work?

“When we talk about our alternative credit strategy, what we mean is incremental data,” Andy Sheehan, general manager, Clarity Services, Experian, told Bank Innovation.

An acquisition by Experian earlier in the year, Clarity allows Experian access to 62 million more consumers it currently lacks data on, 24 million of which are thin file, per the development of its Clear Early Risk Score: a predictive model that brings these consumers into the fold by focusing on data like rental practices or other payments not traditionally included in credit scoring.

“Some consumers cannot apply for a traditional credit loan with a big bank…so they turn to alternative lenders,” Sheehan said. This cohort of consumers includes the 40% of Americans who would be unable to cover a $400 emergency, he said, leaving their options limited.

These consumers were “previously unavailable to credit serving,” Sheehan told Bank Innovation. The company now has “positive rental data on 20 million consumers,” he said, a factor that then allows Experian to provide lenders and other financial service companies with a more accurate measure of a consumer’s creditworthiness.

The company is unable to share exactly what kind of data goes into its Early Risk Score, Michelle Raneri, vice president, analytics and business development for Experian, told Bank Innovation, though it does includes payment and inquiry information from payday and short-term lenders.

While the final version is live since March of this year, there are no lenders who are using the score as yet, though several are in the pilot phase, she said. Raneri was unable to name any of these lenders at present.

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