Consumers' financial stability is an always shifting landscape. This is influenced by factors like job changes, inflation, and economic fluctuations. These factors are why credit risk managers need to stay ahead of these changes to manage accounts and mitigate risks. While credit scores offer a foundational understanding, they often do not provide insights into consumers' full financial health. That's why credit risk managers need to find better ways to manage accounts.

In our recent eBook¹, we discuss ways to elevate your account management practices. We have recapped those tips for you here. 

Our analysis reports that using newer credit attributes can enhance performance. It results in an average 15% lift, and potential increases of up to 94% over legacy attributes.² With thousands of credit attributes available, focusing on specific categories can refine account reviews. These categories include:

• market-driven attributes that help identify consumers who may be impacted by inflation and interest rates, 

• indicators of ability-to-pay and accommodations, 

• loan-specific attributes, 

• and trended attributes reflecting 24 months of credit behavior.

Moreover, transitioning from annual to more frequent reviews can increase the amount of exposed dollar risk saved.³ Shifting to quarterly reviews can save 3.5 times more. And shifting to monthly reviews can save up to 6 times more.³ Consumers' financial situations are changing quickly because of inflation and high interest rates. Reviewing accounts more often lets lenders take action faster to prevent losses and help consumers manage their credit.

Using timely insights into - changes in consumers’ credit can help you identify early risks and retention opportunities, potentially saving between 40% to 50% on newly identified dollars at risk.² This allows lenders to respond promptly to mitigate losses while maintaining market share. Furthermore, leveraging alternative consumer financial data complements traditional credit scores by providing a broader view of consumers' finances. Data points such as employment and income data, payment history for utilities and telecom accounts, and consumer-permissioned bank transaction data offer valuable insights into day-to-day financial behaviors.

To deepen account reviews, incorporating data on consumers' financial durability can be invaluable. Measures such as estimated income, spending power, and credit capacity differentiate consumers within the same credit score band. This helps with risk assessment, and treatment adjustment, for delinquent accounts.

Another related area to be aware of is synthetic identity fraud. Synthetic identity fraud poses a growing threat, with potential losses quickly accumulating.⁵ Implementing machine learning techniques as well as continuous alerts can help detect, and mitigate, synthetic identity behaviors effectively.

In today's landscape the customer experience is paramount. Elevating account management requires personalized approaches. Essential strategies include: 

• building stronger identity graphs, 

• leveraging financial insights for personalized messaging, 

• and identifying best customers for targeted offers are essential strategies.⁶

Additionally, leveraging financial durability insights can identify households for tailored product campaigns, credit line increases, and debt consolidation opportunities. This can go a long way in fostering customer loyalty and satisfaction.

Navigating the complexities of consumer changing finances demands a multifaceted approach to account management. Remember to: 

• embrace advanced credit attributes, 

• leverage alternative data sources, 

• and prioritize customer experience.

That way credit risk managers can mitigate risks, seize opportunities, and foster long-term customer relationships. For more on staying ahead of the curve, check out our ebook, 7 Tips to Elevate Account Management for Your Credit Portfolio. 

Sources:

1. 7 Tips to Elevate Account Management, Equifax

2. Equifax analysis

3. Equifax analysis. Based on lender taking action immediately after recognizing delinquency at a different lender

4. Financial durability measures are non-FCRA and are not intended to be used for the extension of credit to any individual, nor may they be used for purposes of determining an individual’s creditworthiness or for any other purpose contemplated under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

5. Urjanet Survey

6. State of Marketing 2021, Salesforce