The Positive Impact of Utility Credit Reporting Webinar

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The positive impact of
utility credit reporting
May 20, 2015
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2©2015 Experian Information Solutions, Inc. All rights reserved.
Experian Public.
The positive impact of utility credit reporting
Speakers
Chris Magnotti, Analytical Consultant, Experian
Chris 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, Experian
Ashley 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.

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
Agenda

Experian Public.
Credit
reporting
and the
consumer The positive impact of
utility credit
reporting
4

Experian Public.
Regulatory 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
“ ”

Experian Public.
Independent 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
“ ”

Experian Public.
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
Public 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

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
Our obligation

Experian Public.
CFPB 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.
”
“
— 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
“ ”

Experian Public.
Consumer benefits
Educated consumers
Through financial literacy and
access to their credit file,
consumers may better understand
their credit report and dispute less
Customer disputes
Consumer will be less
likely to dispute when
there is complete and
accurate data
Accurate credit score
Incomplete or missing
data may have an
impact to score, or
result in no score at all
Transparency
Greater 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 offerings
Consumers may obtain
better interest rates and pay
lower fees. Absence of
credit may deem customer
as ‘high-risk’ and limit offers
Customer experience
Lenders can offer a
relevant, meaningful
conversation and
experience with the
consumer
Non-credit needs
Consumer can provide
Credit report for job or
rental application
“
”
CONSUMER
60%of the Society for Resource
Management’s member
employers used credit reports
to screen applicants for at
least some of their positions

Experian Public.
Background
utility credit
reporting
11

Experian Public.
What 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

Experian Public.
What 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

Experian Public.
Key terms and segment definitions
Risk segment
Score 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 thickness
No 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

Experian Public.
What 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
Medical
payment
obligations
Rental
housing
Traditional
utility
What about on-time payment
obligations, the consumer’s
positive data?
What is missing?
Today

Experian Public.
Consumer
trade data
Current
scenario
Final score
VantageScore®
Score
logic
Analysis 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 trade
Current account status
Simulation
Final score
VantageScore®
Score
logic
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

Experian Public.
Results
Current account statuses only
utility credit
reporting
17

Experian Public.
The Positive Impact of Utility Credit Reporting
File thickness (no-hit / thin / thick)
and the impact of adding the new trade data
Energy utility
45%
55%
36%
64%
0%
20%
40%
60%
80%
No hit Thin Thick
Before trade added After trade added
Decreased
20%
Increased
20%
Missing no hits
because pulled
from credit file

Experian Public.
VantageScore® risk segment migration
and the impact of adding the new trade data
Energy utility
3%
30%
13%
54%
2%
17%
20%
62%
0%
10%
20%
30%
40%
50%
60%
70%
Score exclusions Subprime Non-prime Prime
Before trade added After trade added
Decreased
33%
Increased 15%
Decreased
43%
Increased
54%

Experian Public.
VantageScore® change and the impact
of adding the new trade data
Energy utility
1.8% 1.4%
21%
31%
46%
0%
10%
20%
30%
40%
50%
-11+ -1 to -10 0 1 to 10 11+
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

Experian Public.
VantageScore® change and the impact
of adding the new trade data
Energy utility
1.8% 1.4%
21%
31%
46%
0%
20%
40%
60%
80%
100%
-11+ -1 to -10 0 1 to 10 11+
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

Experian Public.
Financial impact to data reporter
and potential credit loss savings
0%
5%
10%
15%
20%
25%
Subprime Near prime Prime
Modeled interest rate % for credit card
Near prime
example:
 Interest APR =
17.5%
 $1,250 interest
per year
Prime
example:
 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

Experian Public.
Financial impact to data reporter
60+ DPD rates by quarter
Energy utility
0%
2%
4%
6%
8%
10%
12%
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 Q1
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

Experian Public.
Support
utility credit
reporting
24

Experian Public.
Where 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
Experian
is your partner
throughout the
process

Experian Public.
Data 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

Experian Public.
 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
Why 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

Experian Public.
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

Experian Public.
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” at
http://www.experian.com/utlities
Visit:
 Data Integrity Services Website at
http://www.experian.com/dataintegrityservices
 CFPB Website at
http://www.consumerfinance.gov/
Resources

Experian Public.
Questions
utility credit
reporting
30

Experian Public.

The Positive Impact of Utility Credit Reporting Webinar

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