Can Transcripts Boost Young Adults’ Credit Scores & Credit Unions’ Borrower Pool?

Can college transcripts help young adults’ credit capabilities as they seek their first apartment, apply for loans or refinance student debt and, in turn, help credit unions expand their borrower base/?

MeasureOne, a San Francisco-based startup, has been working to improve and expand underwriting services to what it calls the emerging $100 billion consumer market. MeritScore, their proprietary FCRA-approved score, establishes a predictive link between academic achievement and credit performance – giving lenders confidence that academic data can signal business-changing outcomes.

According to a recent MeasureOne study, the spending potential of the 18-to-27-year-old population lies somewhere between $29 billion and $143 billion. That includes 30 million people or nearly 25% of the U.S. population, as well as two billion young adults globally, who are forming foundational relationships (60% have a savings account, 54% have a checking account and 32% own a credit card). According to the study, this group represents 40% of consumers in 2020.

This population has unlimited purchasing potential, according to MeasureOne, but the reality is finserv organizations know very little about them as they have little to no credit history and a limited work resume. The data MeasureOne collected showed that 70% went to college, 21% have advanced degrees, 33% transfer between colleges yearly, they spent six years in college and they all have transcript data.

“Our reason for existence is to provide APIs to application developers, product developers, service providers, to enable them to integrate academic data into their workflows,” Elan Amir, CEO at MeasureOne, said. “We’re able to show a direct correlation between academic performance and credit performance.”

The Bay Area fintech provider suggested the possible expansion of financial institutions’ borrower base comes at a critical time for lenders because alternative metrics are catching on with the big three credit bureaus. MeasureOne cited Equifax allowing consumers the opportunity to give lenders their electric, phone and cable payment information. This gave Equifax the information needed to use alternative metrics to help determine consumers’ worthiness for a loan (and potentially expand the pool of approved borrowers). Companies like Goldman Sachs, Ally Financial, Discover Financial Services and upstart-fintech firms are already incorporating these types of metrics to make lending decisions.

Amir also said as companies find better ways to integrate data into their products, it expands opportunities for consumers facing the traditional markers for performance. API models and alternative data, for example, are starting to unlock new opportunities for young adults beyond lending and finance.

MeasureOne pointed out that many companies limit serving young adults, since their products or services require a history of financial or credit performance to determine eligibility. “This is about expanding the pool, products that can be offered by financial institutions to what is traditionally an underserved population, namely 18-to-27-year-olds, prospective customers that really have relatively little information,” Amir noted. He added everybody wins if financial services organizations use academic information appropriately within products and services. “The owner of the data can receive additional consideration and offer products that otherwise would be closed to them. And of course, the financial institution gains a new customer.”

MeasureOne can integrate its tech platform within a credit union’s loan origination system or directly into their decision engine. The technology, which enables the students to connect their academic credentials to their credit union credit application, takes into account all of the information on the transcript, except for the school and major.

Amir added, “We extract the data out, normalize it and then we score it and provide the score, along with the raw data to the credit union who would then integrate it with their underwriting decision.” Amir pointed out they acquired data from about five million loans and across 1.5 million students over 10 years. “So, we’ve got a full credit cycle.”

Amir maintained their value proposition to credit unions is pretty straightforward. “Everybody’s looking to expand their borrower base; the younger cohorts are the most valuable customers.” To the extent MeasureOne can provide exposure in front of credit unions, he said, “We absolutely feel very comfortable that we can have a material impact, in a positive way their ability to serve new members.”