Could your Onboarding Benefit from Alternative Credit Data Insights?

by Jason Heil

It can be difficult to capture the attention of the 21st century consumer—the average American is exposed to 4,000 to 10,000 brand messages per day.¹ In an increasingly competitive marketplace, enterprises must cast their nets wide to expand their universe of prospects, and do so without introducing risk. Alternative credit data can help identify more creditworthy consumers and bring additional benefits that many lenders and service providers may not be aware of.

One of the most common uses of alternative data is to assess prospects that fall outside the traditional credit approval process, including millennial, thin-file and no-hit consumers. These groups are considered “credit invisible” because they often lack a established credit history tracked by one of the three main national credit reporting agencies.2 What they may have is a payment history that consists of modern credit responsibilities, such as marketplace lending and telecommunications transactions, that can be evaluated through alternative credit data when assessing eligibility for credit products and services.

alternative credit data

ID Analytics conducted an analysis of credit applicants across 10 lenders in the auto, telecommunications, credit card, and marketplace lending industries to demonstrate how alternative credit data promotes consumer inclusion. Using insights provided by our alternative credit data we predictively scored 75% of the lenders’ no-hit and thin-file consumers.3 More than 80% of these individuals were seen outside of traditional credit bureau sources, including wireless, cable, and utility accounts; online marketplace loans, payday and subprime lending; and checking/savings accounts.4 Depending on the lender, 10-40% of the applicants initially viewed as unscorable would have been credit eligible.5.

Alternative credit data also helps identify consumers who may be underestimated by traditional scoring models. To demonstrate the benefit of alternative credit data for applicants who may be more creditworthy than they initially appear, ID Analytics looked at eight months of data and more than half a million records from a major retail card provider. Alternative credit data can provide a significant separation of risk within a narrow traditional credit score band and identify consumers who may be underestimated by traditional credit assessments. This analysis revealed that 40% of the card issuer’s marginal (or underestimated) population would have been considered credit eligible based on the lender’s risk-ranking criteria.6

The benefits of alternative credit data go beyond consumer inclusion; it can provide powerful insights into consumer risk throughout the entire credit spectrum, even when assessing consumers with established, prime credit histories. ID Analytics receives regular feedback from our tier-one lenders on the value alternative credit data adds within the prime segment for pricing and delivering competitive offers with greater predictability.

Alternative credit data insights can help enterprises to cast a wider and more strategic net to expand their prospect universe through a more complete view of consumer creditworthiness and help them make more informed credit and pricing optimization decisions.

Join me on April 4 when I present more on this topic  during the webinar Alternative Credit Insights: The Key to Universe Expansion.

 

Jason Heil is the Senior Principal Product Manager for Credit Risk Solutions at ID Analytics

 

1 Forbes, https://www.forbes.com/sites/forbesagencycouncil/2017/08/25/finding-brand-success-in-the-digital-world/#10ac763a626e (accessed February 12, 2018)

2 CFPB Office of Research, Data Point: Credit Invisibles https://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf

3ID Analytics, Alternative Credit Insights: The Key to Financial Inclusion for Consumers, p. 6, May 2017.

4Ibid.

5Ibid.

6Ibid, p. 7.