Score 21% More Consumers and Approve 15.5% More Applicants with a Single Risk Score

During these challenging economic times, lenders need to strike a balance between growing their lending portfolios and managing risk. In a previous article, we discussed how lenders could be missing out on 77 million consumers that are thin-file or credit invisible(1), as well as credit-rebuilding consumers that are seeking to gain access to mainstream financial products.

Even though they may not have robust traditional credit files, these consumers could be a good fit for the lender’s products. Lenders can now assess the credit risk of these consumers with a single risk score, OneScore from Equifax, that includes multiple alternative consumer financial datasets that are not found in a traditional credit file:

• Telco, pay TV, and utility account payment history from over 160 providers, plus

• Specialty finance data for more than 80 million borrowers that use these services, plus

• Trended credit data including 24 months of activity

These additional datasets can help lenders assess and approve new consumers for their lending products - especially for credit cards, personal loans, and auto loans. They can expand their portfolio to include consumers that pay their day-to-day bills on time. Or those consumers that reliably meet the terms of loans offered by specialty finance firms. Or those consumers that have improved their credit in the last few years. All of these consumers might be desirable new customers without changing the lender’s risk profile.

Find and approve new consumers and better mitigate risk with a single score 

With this single risk score, lenders can significantly expand into new consumer populations, improve their ability to predict risk, and gain more applicants and customers – which could translate into what could be millions of incremental dollars. Specifically, incorporating a single risk score that includes non-credit payment history and trended credit activity into decisioning models can allow lenders to:

• Score up to 21% more consumers for their lending products when compared to a traditional credit score alone(2)

• Achieve a 10% lift in predicting the likelihood of delinquency within the next 12 months(3)

• Approve up to 15.5% more applicants for their lending products without incurring additional risk(4)

One recent analysis for a fintech company that offers Buy Now, Pay Later installment loans showed that this single risk score can enable them to approve more applicants while offering a much greater lift in predicting delinquency – 57% – compared to the lender’s traditional credit-based model(5). That’s a huge gain for this firm’s risk management efforts that could prevent a significant amount of lost dollars in the future. 

Just the alternative data – or all-in-one

Lenders that offer consumers access to funds for everyday living – such as credit cards, personal loans, and auto loans – can quickly enhance decisioning models with a single score that combines data on multiple alternative consumer payment behaviors and credit history. This is much simpler and quicker than analyzing each of these datasets alone. 

When it comes to incorporating alternative data insights into their models, lenders have options. They can use a standalone, all-in-one consumer risk score. This score includes both traditional credit data (like our Equifax Credit Report) and alternative data. Or, they can incorporate just the alternative data as an add-on to existing credit models or other traditional scores already in place. For all you decision scientists that might be reading this, this single risk score is fueled by advanced machine learning, including Gradient Boosting Machine (GBM) learning.

With a single risk score that includes factors that are outside the traditional credit dataset, lenders can more confidently approve previously overlooked applicants. That’s a good thing for both lenders and consumers. Lenders can find new customers for their offers while managing risk. And, consumers that have demonstrated positive payment histories for accounts that are outside the traditional credit file can gain access to more lending products and terms that are commensurate with their responsible credit histories.   

Learn more about how OneScore, a single risk score that includes non-credit payment records, can help lenders support growth efforts during an uncertain economy.

 

1. Equifax analytics

2. Equifax analytics, when compared to a traditional credit score alone

3. Equifax analytics, when compared to a traditional credit score alone

4. Equifax analytics, when used in combination with a traditional risk score

5. Equifax analytics