Three Reasons Why an Updated Income Model Can Help You Make Better Business Decisions

Many lenders frequently use income estimates to help inform their decisions. For example, income estimates are often used to help evaluate income for consumers applying for loans, especially when loan stipulations are in place. This helps lenders improve the customer experience by supporting a faster, frictionless application process without the need for additional income verification. Income estimates can also be used to inform acquisition efforts, portfolio management, and many other non-adverse actionable income-related decisions. 

But what happens if the income model that your company is relying on uses dated attributes and modeling techniques? Inaccurate income estimates could result in fewer new customers, higher costs for additional verifications, lost opportunities to expand relationships, and increased charge-offs. In short, confidence in decision making is eroded.

The Solution: A Refreshed Income Model

For income models to be effective, they need to be continuously refreshed with new scores and attributes that reflect current consumer behaviors and are driven by new modeling methodologies. Lenders can find that in Consumer IncomeView+. It’s an updated, re-engineered version of the older Consumer IncomeView model that can help companies better assess an individual consumer’s estimated full-time employment income - without requiring consumers to provide proof of income documents. 

This new model provides several key advantages over the older model. Here are three ways that the updated income model can help you better trust income estimates to inform decisions:

1. Reduces impact of model drift with seamless access to model updates: Thanks to the powerful innovation of the Equifax Cloud, when the Consumer IncomeView+ model is updated, users can instantly gain access to the most up-to-date income estimates. This means fewer impacts from model drift and helps users avoid the hassle of migrations. 

2. Benefit from newer inputs and the latest analytics: Better data and analytics means more precise income estimates. Consumer IncomeView+ includes updated modeling techniques including gradient boosting machine learning and AI. Plus, it is fueled by the most recent consumer credit attributes (point-in-time and trended data) and alternative data. 

3. Gain a broader range of income estimates: The updated model provides income estimates from $16,000 to $440,000 - expanding the range by $144,000 over the older model.

The result of these improvements? The new model is 11% more accurate in its income estimates. And, it can provide a 30% decrease in the number of consumers who will likely require additional verifications.¹ That can translate into:

• more new customers

• saved expenses

• an opportunity to expand more relationships

• fewer losses

In fact, one financial institution that uses the old income model for a variety of applications tested the new income model. The analysis showed that by using the new income model, the company could: 

• Save up to $100,000 in additional income verification expense

• Gain 7% improvement in segmenting consumers for optimal offers

• More confidently rely on updated income estimates for additional applications based on a 19% improvement in predicting income within a 20% range

Don’t Let Dated Income Estimates Slow Your Growth

Income estimates are used for an abundance of applications - from acquisition all the way through to collections. If you are relying on income estimates from an older model, it’s time to explore better options. Learn how Consumer IncomeView+ can help you make stronger, more confident income-related decisions that can bring you more new customers and drive growth.

Source:

1.Equifax analytics