The document discusses financial health and credit scores, noting that many millennials struggle with high student debt, low wages, and poor credit that affects their ability to access affordable capital. It proposes that understanding a household's full financial situation over time, including liquidity, solvency, and income risks, could help develop financial products and services better tailored to individual needs and reduce behavioral risks through aligned incentives. The Read Enterprises team believes this approach may help improve economic outcomes for financially vulnerable households.

1. READ ENTERPRISES
FINANCIAL
HEALTH AND
CREDIT SCORES
The good, the bad and the ugly

2. DISCUSSION OUTLINE
TODAY'S HIGHLIGHTS
Brief Introduction
Financial Struggles
Insights on the Credit Scoring System
Liquidity Access and Financial Health
Shifting Paradigms for Better Outcomes

3. WHAT IS FINANCIAL
HEALTH?
Financial health comes about when your financial
situation allows you to be resilient and pursue
opportunities over time.
THE FINANCIAL HEALTH NETWORK

4. MANY MILLENNIALS HAVE
A HARD TIME FINDING A
JOB AFTER COLLEGE
Especially one that can pay the bills

5. WHAT ARE THE
FINANCIAL
STRUGGLES OF
MILLENNIALS?
Unsecured debt
Highest median amount of unsecured
debt with student debt being the most
significant contributor.
Low credit scores
Highest share of poor credit scores
below 621.
Low wages & underemployed
For most Americans the most rapid
salary gains come between the ages of
30 to 35. 43% of college graduates
are underemployed.

6. BASED ON A FINANCIAL HEALTH SURVEY
of households with income below $60,000 are
financially healthy
15%

7. HOW IT WORK AND ITS
IMPACT ON BORROWERS
UNDERSTANDING CREDIT SCORES
Exploring the gaps

8. Payment History
35%
Amounts Owed
30%
Length of Credit History
15%
Credit Mix
10%
New Credit
10%
FICO SCORE
COMPOSITION
UNIQUELY FOCUSED ON DEBT
The score focuses on credit performance with a
strong bias towards payment history; this
results in 1) high capital costs for individuals
with little or no credit history and 2) incomplete
and inaccurate default risk assumptions.

9. FICO SCORE IN CONTEXT
Get a Credit to get
a Score
Getting credit, getting a credit
score and vice versa - a close
circle interplay.
Skewed towards
Age
The distribution of credit scores
is positively correlated to age.
Unsecured debt amounts are
negatively correlated to age.
90% Market Share
The credit scoring system is a
monopolistic, close-knit
industry. The three credit
bureaus collaborate with FICO
and simultaneously compete via
VantageScore.

10. LIQUIDITY RULES
A CONCEPT OF LIQUIDITY, SOLVENCY & CAPITAL
Solvency refers to the capacity to meet long-term financial
commitments. Liquidity refers to the ability to pay short-term
obligations.
sWhile money is used to purchase goods and services for
consumption, capital is more durable and used to
generate wealth through investments.

11. Under Age 35 Age 35 - 55 Over Age 55
200%
150%
100%
50%
0%
SAVINGS, LOW
CREDIT SCORE &
INCOME
A NEGATIVE CORRELATION
Unsurprisingly, savings and credit score are
negatively correlated. However, both are only
moderately correlated to median income.

12. THE POWER OF LIQUIDITY
Default &
Delinquency
Sufficient liquidity reduces
economic risks that lead to
household delinquencies or
defaults.
Performance
Impact
Inability to serve debt leads to
stress which impacts health
and job performance.
Macro-economic
Considerations
Household debt increases the
probability of banking crises.
The effect is twice as large as
for non-financial corporate
debt.

13. MAKING IT WORK
Personal consumption has the largest share of
the US GDP and household debt has a long-term
impact on economic growth.
Understanding the financial situation and
development of households is paramount.

14. Future economic
resources
Young households are the
future of the economy.
Household debt
and GDP
Debt boosts consumption and
GDP growth in the short run.
The long-run negative effects
outweigh the short-term
positive effects.
Liquidity trap
Increasing debt affects short- &
long-term savings.
Financial capability
and behaviour
Household finances determine
the economic capability & risk.
Behavioral risks can be
mitigated through incentives.
Productivity over
assets
Assets are inflationary, new
businesses are not.
Education, a key
driver of economic
advancement
The affordability of education
determines the capability to
compete.

15. WHAT CAN BE DONE?
KNOW YOUR CUSTOMER
Understanding the financial health and
capability of a household over time is core.
UNDERSTAND CAPITAL
NEED AND USE
Understanding the context is important,
mainly when it comes to financially
vulnerable households.
ADVICE APPROPRIATELY
Financial knowledge arbitration backfires.
Trust is built over a long period of time and
lost in a second.
DON'T BLEND ECONOMIC
AND BEHAVIORAL RISKS
Economic risks sets the financial
framework & can be stress-tested.
Behavioral risk can be mitigated by
aligning interests.

16. OUR VALUE PROPOSITION
Optimization of capital
needs in context of the
financial situation
through partnerships
with financial
institutions.
Our default risk
calculation is based on
economic factors
complementary to
current credit scores.
Structuring financial
products, reducing the
behavioral risk
through alignment of
interests.
Financial
Health
We provide a health-
check report assessing
liquidity, solvency and
income risk.
Default Risk
Improving
Capital Access
Product
Development

17. THE READ TEAM
Alberto Furger
Co-Founder, CEO
Oliver Olbort
Co-Founder, CSO
Michael Rava
Partner, Marketing
James Melenkevitz
Partner, Data Science, Quant
Raja Yogarajah
Partner, Lead Dev

18. GET IN TOUCH WITH US!
Contacts
Oliver Olbort
Alberto Furger
Email Addresses
oliver@readenterprises.org
alberto@readenterprises.org