Experian Information Solutions Inc.

505 City Parkway West
Orange, California 92868
U.S.A.
Telephone: (714) 385-7000
Fax: (714) 385-7349
Web site: http://www.experian.com

Wholly Owned Subsidiary of Great Universal Stores PLC
Incorporated: 1996 as Experian Corporation
Employees: 12,000
Sales: $1.44 billion (2001)
NAIC: 56145 Credit Bureaus; 514191 On-Line Information Services

Experian Information Solutions Inc. is an international leader in information services. Formerly a division of automotive and electronics giant TRW, the company is one of the big three consumer credit reporting services in the United States, along with TransUnion Corp. and Equifax Inc. The company is also the market leader in consumer credit reporting in Great Britain, and it does business in about 50 countries worldwide. Experian maintains exhaustive databases on consumer credit and business credit, and tailors these in various ways for direct marketers, magazine publishers, lenders, collection agencies, and others. The company also runs a National Fraud Database, which offers consumer identification and authentication for companies that use on-line credit card transactions. And Experian’s National Business Database keeps tabs on roughly 14 million small and mid-sized businesses in North America. In 1996 Experian merged with CCN, the credit reporting unit of the British company Great Universal Stores.

Growth Out of Automotive Electronics: 1960s

The company that became Experian Information Solutions began as a unit of TRW. TRW was founded in 1901 as the Cleveland Cap Screw Co. It began by making cap screws, bolts, and studs, but soon its main product was welded valves for cars made by automotive pioneer Alexander Winton. The company went through several owners and name changes early in the 20th century until in 1926 it took the name Thompson Products Inc. At that time it made a variety of parts for both the automotive and aviation industries. In 1958, Thompson Products merged with Ramo-Wooldridge Corp. and took the name Thompson-Ramo-Wooldridge. Ramo-Wooldridge was a leading company in the defense electronics industry. The merged company became a giant in defense and in automotive parts. It invented many key automotive components such as the permanently lubricated steering linkage and the seat-belt pretensioning device. By the mid-1960s, the company shortened its name to TRW and began a global expansion, acquiring plants in Germany, Brazil, and the United Kingdom.

While TRW was developing rack-and-pinion power steering and seat belt technology, it also launched a consumer credit information bureau. The company began compiling a consumer database in the mid-1960s. Starting in the mid-1970s, TRW also operated a small-business database. TRW’s information division grew by both internal expansion and acquisition. By the mid-1980s, TRW Information Services, as the consumer credit unit was called, had credit histories on file of approximately 90 million Americans. At that time, TRW Information Services was the largest U.S. credit reporting agency.

Making a Name in the 1980s

Information services was apparently a profitable business, yet it had little to do with the main products of the rest of TRW. “TRW brass had never been comfortable with the information business,” claimed Direct in a March 1, 1999 interview with Experian CEO D. Van Skilling. Though TRW hung on to the unit for a long time, there were indications by the 1980s that the information services division was not as well run as it might have been. In 1984, someone stole an account password from the consumer credit division and posted it on an electronic bulletin board. The company moved quickly to change the password and halt any leaks of private credit information, but the event did little for TRW’s reputation. TRW also seemed uncertain how to present itself to consumers. Consumers did not come up against their credit reports in most cases unless there was a problem. In 1986, TRW launched a new consumer-oriented business, TRW Credentials Service, which let subscribers access their credit histories once a year for a $30 fee. Years later, TRW was forced to allow consumers a free annual look at their credit reports. In 1989, the company finished a study of consumer attitudes toward credit reporting. It found a wealth of problems and complaints. Even if consumers had bad experiences with another credit reporting bureau, TRW seemed to take the heat, as it was so large and well known.

That year, D. Van Skilling took over as chief executive of TRW’s Information Systems and Services division. Skilling’s career path was somewhat indicative of TRW’s discomfiture with the division. He had a bachelor’s degree in chemistry, and worked in naval intelligence during the Korean War. Skilling then worked in various areas, including marketing, of TRW’s oil field equipment group, and also in the industrial products group. Nothing in his background directly prepared him for working in information services, yet he became the head man of the division. Skilling quickly realized that the company’s computer systems were outdated and insufficient. (Perhaps he had help with this. Skilling claimed that he had given Bill Gates the only job he ever held before he went on to found Microsoft.) In addition, the information from the consumer study also showed that much could be improved. The company began investing in upgrades, spending some $30 million between 1989 and 1991. But Skilling was apparently not able to make changes quickly or thoroughly enough to forestall a public relations disaster.

Two years into Skilling’s term, in 1991, a story of egregious credit reporting errors at TRW received wide press. TRW used subcontractors to gather information for the millions of credit reports it had on file. Apparently because of the errors of one part-time worker hired by a subcontractor, thousands of people in New England found themselves with bad credit reports. In the town of Norwich, Vermont, the worker had gone into the town hall and asked for the names of people with liens against their property because of unpaid local taxes. But what actually went into the worker’s report were the names of the people who had paid their taxes—all 1,400 of them. Some of these people found themselves denied credit, and the problem was revealed. TRW at first claimed the Norwich case was an isolated incident. But as more similar cases cropped up across New England, the company eventually was forced to delete all local tax data from consumer files for people in Vermont, Rhode Island, Maine, and New Hampshire. The Wall Street Journal (October 14, 1991) relayed the case of a small-town funeral home director who claimed to have been switched to five different numbers when he called TRW to complain about an erroneous credit report. It took the company a week to respond to him. The New England autumn proved a picturesque background for television and magazine stories about the mammoth, unresponsive company and the beleaguered little guy. Things could hardly have looked worse for TRW. Months before the New England story broke, more than a dozen states had filed suit against the company. The suits alleged that TRW used sloppy procedures to create credit files on consumers, that the company did not adequately respond to consumer complaints, and that in some instances, after errors were corrected at consumer insistence, the company reinserted the faulty data into the consumers’ files. The suits also alleged that TRW illegally sold consumer data to direct marketers.

TRW settled all the cases quickly, signing a consent decree in December 1991 promising to give credit rating information to consumers promptly and clearly. Consumers could order one free copy of their credit report each year. Despite the obvious problems in the information services division, TRW made it plain that it was hanging on to the unit. TRW’s overall earnings were slowing, and it had to put several operations on the auction block. But even as it was trimming costs elsewhere, TRW invested more in Information Systems and Services. After spending $30 million between 1989 and 1991, the company budgeted another $26 million for upgrades in the division for 1992.

A Spinoff and a Sale: Mid-1990s

There was no doubt that the Information Systems and Services division was valuable to TRW. It did not break out financial figures for the unit except to say that it contributed less than 10 percent of the company’s revenues. But the division had about a 35 percent share of the U.S. credit reporting market, and the industry seemed poised for growth. As data management became more sophisticated, the credit reporting industry looked forward to being able to sell precisely targeted lists of consumers to marketers and lenders. TRW used its database expertise in the mid-1990s to help in its own political lobbying efforts. It created a database called Constituent Relations Information Systems (CRIS) in 1994 which in part kept track of over 8,000 government officials and their stance on issues that might affect TRW. Keeping records of a couple thousand legislators and their aides was small potatoes to a company that now had 180 million individual credit histories on file. It took in some 33 million new pieces of information every single day, and growth potential seemed strong, as long as it could come up with more ways to organize and market its data.

Company Perspectives:

Experian mission statement: To be the market leader in helping businesses optimize interactions with their customers.

Experian is the world’s largest information provider. We help businesses implement successful customer relationship management, marketing and risk management initiatives. We provide the data, services and technology to make CRM work anytime, anywhere.

Nevertheless, information services remained a strange fit with the rest of TRW. D. Van Skilling had overseen great changes in the division since taking over in 1989. But he believed the division could do more as an independent company. Constrained by top management at TRW, he told them “Play me or trade me,” according to the Direct article quoted above. Skilling and more than 60 other top executives at the unit went in with two leading buyout firms and raised cash to take the Information Systems and Services division private in 1996. The buyout firms were Bain Capital and Thomas H. Lee Co. Both these firms had been involved in high-profile transactions in the early 1990s. Thomas H. Lee had earned $900 million for itself and its investors when it sold Snapple Beverages to Quaker Oats in 1994, and Bain Capital had managed to acquire the clinical diagnostics unit of chemical giant Du Pont in 1995, just months before the TRW deal. The investment group gave TRW $1.01 billion in cash for the credit reporting unit, along with stock adding up to a 16 percent share in the new company. At the time of the sale, the unit was bringing in about $540 million in annual revenue. TRW was pleased, claiming the cash would allow the company to make investments in its remaining automotive and aerospace businesses.

The newly independent company took the name Experian. It planned to increase its business in target marketing, that is, the tailoring of its databases to suit specific customer needs; it also wanted to expand into overseas markets. So Experian made an offer to the British conglomerate Great Universal Stores to buy its credit reporting unit, CCN Group Ltd Great Universal Stores was perhaps best known for its steadfast outerwear unit, Burberrys. CCN was the largest credit reporting company in the United Kingdom, and it was responsible for some 5 percent of Great Universal Stores’ profits. CCN had apparently been interested in buying the information services unit from TRW for years, but talks had gone nowhere. When Great Universal Stores received the offer from Experian, it responded by asking to buy Experian for $1.7 billion. Experian’s spinoff from TRW had not been finalized until September 1996, and the offer from Great Universal Stores came in November. The price was right, as it gave the investment group some $500 million over what they had just paid to TRW. Thomas Lee and Bain Capital each tripled the $100 million they had put into the deal, and several millionaires were minted from the group of TRW executives involved in the spinoff.

CCN changed its name to Experian, and the company operated from two headquarters, one in Nottingham, England, and the other in Orange, California. The newly merged company quickly made acquisitions of its own. It bought two direct marketing firms, Metromail and Direct Marketing Technology. The company touted itself as much more than a credit reporting agency. It had vast files on both consumers and small businesses, and it found more ways to use these resources. In 1998 Experian debuted a so-called publisher co-op database, called CircBase. This database combined lists of magazine subscribers with catalog ordering information. It covered over 70 million households, and gave magazine publishers more specific data about their customers. Older databases on this model had only been able to generate lists of consumers sorted by more general factors such as age, sex, income, and ZIP code. But CircBase was able to identify consumers who had actually bought certain items, such as cookware or fishing gear. This gave subscribers a clearer idea of who might be interested in a cooking or fishing magazine, for example.

By 2000, Experian was strongly interested in building business on the Internet. Moving beyond direct mail marketing, the company looked into targeted e-mail marketing, forming a joint venture with a volume e-mail company called FloNetwork Inc. FloNetwork used what was called permission-based marketing, where consumers were in a more interactive relationship with the marketer, asking for information. FloNetwork offered Experian its expertise in online communication, and Experian gave the marketer more access to European and U.K. markets. Experian also acquired an e-mail marketing firm, Exactis.com, in 2000, spending $13.5 million for it. Another key piece of online business Experian developed was fraud prevention. It had developed its own consumer identification technology when it began offering credit reports online, so that only the appropriate person could access the report. Experian then offered this technology to other businesses selling merchandise or services online.

In other new businesses, Experian began offering a risk-assessment tool called Cross View Solutions, which helped lenders assess potential customers who had little or no credit history. The company also began pursuing the collections market, selling its database services to companies searching for people who had fallen behind on bills or loan payments. Experian spent millions of dollars in the early 2000s improving its small business database. It collected information on some ten million businesses, combing through thousands of phone directories and following up with telephone interviews. In mid-2000 its business database contained files on about 15 million businesses, and the company aimed to add another nine million.

By 2001, Experian had focused its growth plans on four main areas: risk management, fraud prevention, collections, and authentication and marketing. It planned to expand its international business, too. International business accounted for about 35 percent of the company’s revenue, with the rest from North America. In the United Kingdom, the company had about a two-thirds share of the consumer credit reporting market. In business credit reporting, the company was locked in a tie with Dun & Bradstreet for first place in the U.K. market. Experian laid off some workers in the United States in 2001, in a move geared to increase efficiency. The company announced it would drop some unprofitable product lines, and try to move more of its services to the Internet.

Principal Subsidiaries

Experian Direct Technology.

Principal Divisions

Experian North America; Experian International.

Key Dates:

1901:

TRW is founded as the Cleveland Cap Screw Co.

1926:

Company’s name is changed to Thompson Products Inc.

1984:

TRW Information Services is largest U.S. credit reporting agency.

1989:

D. Van Skilling takes over TRW’s Information Systems and Services division.

1991:

TRW settles multiple state lawsuits regarding faulty credit reporting.

1996:

TRW spins off information unit; new company is acquired by Great Universal Stores.

Principal Competitors

TransUnion Corp.; Equifax Inc.; The Dun & Bradstreet Corporation.

Further Reading

Beeler, Amanda, “Experian Touts Service via Webcast,” Advertising Age, February 14, 2000, p. 26.

“Case of the Missing Password,” Time, July 2, 1984, p. 53.

“CCN Group Adopts Experian Name,” American Banker, June 20, 1997, p. 12.

Daley, James, “TRW Goes to Washington,” Forbes ASAP, June 6, 1994, pp. 127-28.

Ennis, Teresa, “New Life for Database Co-Opetition,” Folio, December 15, 1999, p. 19.

“Experian and FloNetwork Form Alliance to Deliver Powerful Email Marketing Solutions to UK and Europe,” Canadian Corporate News, September 12, 2000.

Hayes, Thomas C., “A New Start at a TRW Hot Spot,” New York Times, December 15, 1991, p. F12.

Hirsch, James S., “Buyout Group Hits $500 Million Jackpot,” Wall Street Journal, November 15, 1996, p. A5.

“Keeping an Eye on Your Credit Profile,” Business Week, January 20, 1986, p. 82.

Ladwig, Kit, “Global Credit Risk Signal Changes,” Collections and Credit Risk, July 2001, p. 43.

“Large British Retailer to Buy U.S. Credit-Data Company,” New York Times, November 15, 1996, p. D2.

Lucas, Peter, “Think Global, Act Local,” Collections and Credit Risk, July 2001, p. 26.

McGeer, Bonnie, “Vendor Eyes the Future with Revamped Database and New Pricing Structure,” Small Business Banker, May 2000, p. 8.

Miller, Michael W., “Rash of Errors Blemishes TRW Credit Reports,” Wall Street Journal, October 14, 1991, pp. B1-B2.

“The Noise Was Great; the Result Was TRW,” Automotive News, April 29, 1996, p. S104.

“Orange, Calif.-Based Credit Reporting Firm Experian Lays Off 150,” Knight-Ridder/Tribune Business News, July 14, 2001, p. ITEM01195040.

“The Right Relationship,” Folio, November 2000, p. S3.

Schultz, Ray, “Skilling’s Laws,” Direct, March 1, 1999, p. 9.

“TRW Credit Reporting Unit to Be Sold for $1 Billion,” New York Times, February 10, 1996, p. 38.

“TRW Promises to Change Its Ways,” Business Week, December 23, 1991, p. 38.

“TRW’s Credit-Data Unit Nears Accord with States,” Wall Street Journal, December 6, 1991, p. A7.

—A. Woodward