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Experian is one of the three major consumer credit reporting agencies. These agencies have spent decades collecting “traditional” credit data and adding it to consumer reports to establish a person’s credit profile and credit score. However, with more than 11 percent of the U.S. adult population having little to no credit data, the major credit bureaus have come up with new solutions.
One of these exciting new solutions, for both lenders and borrowers, is Experian’s Clarity Services.
Experian’s Clarity Services uses alternative credit data to help consumers who have thin or nonexistent credit profiles improve their credit score. Clarity Services is the largest Fair Credit Reporting Act (FCRA)-regulated credit bureau to focus on the “thin credit” segment.
The use of nontraditional credit data in surveying the creditworthiness of a consumer is a relatively new concept, but it’s one that all the credit bureaus are starting to show interest in. This allows the millions of people with thin credit to have other financial data that still speaks to their credit behavior fairly evaluated.
Traditional credit data looks at factors such as debt, mortgages, auto leases, personal loans, credit cards, credit lines and more. Alternative credit data considers items such as rent payments, utility bills, cell phone bills and TV streaming services. If a person is responsible and pays their rent on time, it’s a fair assumption that they’ll pay their other bills on time as well.
Clarity’s exclusive consumer data understands the limitations of basic risk scores and looks to expand the view of credit behavior and financial circumstances of customers. This is especially beneficial to consumers in the low credit score ranges.
Clarity Services pulls and evaluates data from:
For the right person, Experian’s Clarity Services can boost their credit profile. Clarity states that its services focus on the “under-banked, near-prime and subprime consumer segment.” Millions of Americans have thin or nonexistent credit files, but that doesn’t mean they should be punished.
Previously, lenders would have to deny these consumers financial products or offer them inferior borrowing terms and high interest rates. There were no systems in place for lenders to access nontraditional credit data to assess other factors that may speak to a consumer’s risk.
Now, lending institutions can use Clarity to access additional information about lenders, allowing them to make a more informed decision. Clarity also provides real-time data, so lenders get the most up-to-date picture of a consumer.
By using this full range of data, lenders can:
Clarity only takes data from authoritative sources. These sources are a variety of financial service providers, including online small-dollar (single pay) lenders, online installment lenders, storefront installment lenders, storefront small-dollar (single pay) lenders, auto title and rent-to-own lenders and more.
Landlords and the other sources mentioned above can all provide consumer data in real time.
Consumers can request their Clarity score for free by calling Clarity’s phone number or mailing in a form.
It’s important to understand that a Clarity score is not your FICO score, which is used or created by the three traditional credit bureaus (Experian, TransUnion and Equifax). The Clarity score is meant to identify a consumer’s risk and can be accessed by the individual themselves or lenders.
You can also access your Clarity report for free by calling their phone number or filling out and mailing in a form.
Experian’s Clarity Services also offers other types of services. You can sign up for fraud alerts, which will notify potential grantors to check your identity before extending credit. You can choose fraud alert protection for one year or seven years.
Additionally, consumers can sign up for credit freezes. This can be beneficial if you believe someone is trying to steal your identity and open accounts under your name.
Everyone is automatically enrolled and data is automatically collected. Lenders can use this information to send you unsolicited offers of credit or insurance. However, consumers can choose to opt out of prescreened offers related to this information if they wish. You can choose to do so for a five-year period or permanently.
Before you consider whether Clarity Services is useful for you, check your credit report. This will help you know whether you have a thin file and can benefit from alternative credit data.
If you’re a subprime borrower, the next step is to check your Clarity Services credit report and credit score. This way, you’ll be able to see what potential lenders see when they use Clarity Services to check your application.
As you take actions to improve your score, check back on your Clarity Services information to see if your efforts are seeing results.
Keep in mind that many lenders don’t use Clarity Services, so that’s a limitation. If your credit is thin and you’re relying on Clarity Services information, you’ll likely need to go out of your way to find a lender that uses Clarity Services.
If you need to, don’t forget that Clarity Services can help protect your account. You can place a security freeze or fraud alert anytime you need it. No matter what, try to practice good credit usage.
You want to work on building your credit so you can eventually get to a place where your traditional FICO score is strong enough on its own to speak to your creditworthiness. You can improve your score by making payments on time, lowering your debt and maintaining a balanced credit utilization ratio.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.
Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.