Seeking to Find New Lending Audiences? Try Alternative Data

Lenders, how satisfied are you with your approach to prescreen targeting? Do your prescreen campaigns reach fresh audiences? Or are you sending your lending offers to the same consumers over and over?

Enhancing your prescreen targeting strategy is a never-ending process. Many lenders focus on credit scores and attributes. They spend an exorbitant amount of time trying to tweak credit criteria to pinpoint just the right audience for their offers. For example: Maybe you lower your credit score threshold just a bit. Or maybe you incorporate a few new credit attributes. Perhaps adjust your offer structure to be more competitive with the market, or maybe you take the criteria from your best performing campaign of all time and just keep using those same criteria.

While these approaches might be adequate, there is a way that you can reach more new consumers for your lending offers. Consumers that are likely eager to receive your offers. Consumers that are ready to take advantage of your offers. Consumers that are likely to become good customers and a positive addition to your lending portfolio. 

The answer? Alternative data. 

Alternative data goes beyond traditional credit scores and attributes. It allows lenders to gain a more comprehensive view of consumers’ financial behaviors beyond what a credit score typically reflects. Afterall, credit scores do not work too well when it comes to the 76+ million consumers that are thin-file or credit invisible.¹ 

Alternative data offers an effective way to reach new consumers for your offers - plus manage risk

Alternative data factors in behaviors that credit scores often do not capture. For example:

• Discover payment behaviors for day-to-day bills including telecommunications, pay TV, and utilities accounts. Millions of consumers may not have a credit score, but almost everyone has a cell phone or a utility bill!

• Learn payment history for consumers that use specialty finance services. Think short-term and installment loans, payday lending, rent-to-own. Consumers that use these services may not have typical credit histories, but could be responsible payers for these loans.

One such alternative data solution - OneScore - captures both of the above and packages them into a single risk score. 

Now let’s explore how lenders can use this type of solution to fuel Prescreen efforts and find new audiences.

Swap in Mary - An opportunity to acquire your next credit card customer

Say hello to Mary. Mary recently moved to the United States. She has a job, but no credit cards and only one previous installment loan on her credit file. Thus, her credit history is limited. Mary does have a cell phone and she religiously pays that bill on time. She also occasionally takes short-term loans to help furnish the apartment that her cousin is letting her use. She pays these loan commitments off in full and on time as well. 

Would Mary be scorable by your credit-based Prescreen model for your next credit card campaign? Probably not. But even if she was scorable, she likely wouldn’t meet your criteria. However, Mary’s positive cell phone and short-term loan payment history shows that she could be a creditworthy candidate for your offer. With alternative data, you can confidently add Mary to your Prescreen audience for your next credit card campaign. 

You know what? Mary may very likely jump on your credit card offer. She could really use a credit card as a more convenient payment method. Meanwhile, your firm can use the same alternative data risk score as part of both your Prescreen and origination efforts. This makes it more likely that Mary will both respond to AND be approved for your credit card offer. Thumbs up, another new customer that may also provide additional lending opportunities for you in the future. 

Swap out Jake - His inconsistent bill-pay behavior is not worth the risk 

Jake is a Gen Z consumer that has near prime credit and meets your Prescreen targeting criteria. But with alternative data insights, you discover that Jake is consistently late making payments on his utility bills. In fact, he is delinquent on some and might accrue extra fees to keep the lights on. 

Is Jake the kind of consumer you want as your next customer? With increased knowledge on Jake’s bill-pay behaviors, you might not want to send him your next lending offer. His risk level for possible future delinquencies is too high. 

Find new opportunities, minimize risk, and maximize your marketing budget

Most consumers are either moving up or moving down. Especially as inflation and high interest rates continue. This makes it even more important for lenders to gain a more holistic view of consumers’ financial behaviors and challenges and fine-tune acquisition strategies. 

Alternative data can help you maximize your marketing budget and optimize your targeting efforts. Make sure your offers continuously reach new consumers that are a good fit for your offers, while carefully managing risk.

To win more customers, you need to score more consumers and deliver more offers. With OneScore and other alternative data solutions, lenders can expect to score up to 21% more consumers as part of their acquisition efforts. Plus identify 18% of thin or credit invisible consumers that could qualify for prime or near prime offers. (Equifax analytics)

Incorporating alternative data such as OneScore into your Prescreen criteria is easy. See our ebook to learn 5 reasons why incorporating alternative data into your lending practices can help you smartly grow your portfolio.

 

1. Equifax data and analytics