TransUnion estimates that 50-60 million Americans have credit histories with insufficient information to be properly scored. A recent TU study of its CreditVision® data shows over 26 million consumers who were previously considered “unscorable” can now be effectively scored.
In order to gain a more holistic view of consumers, lenders can use trended data elements comprised of actual payment amount, and over 2 years of account history data for each tradeline. With more depth of information, consumers with thin credit files who were historically denied credit based on limited information will now benefit from access to credit. These creditworthy and credit seeking consumers with low-risk behaviors can now be more accurately scored, many in higher score tiers. This means millions of consumers who can now benefit from better rates and terms on credit products—a win-win for both lenders and consumers.
What Consumer Account History Data Means to Lenders:
In addition, advanced scores can provide greater segmentation across risk bands, classifying more consumers as Prime or Super Prime—the segments least likely to go delinquent. The lending community benefits from “new” creditworthy prospects without compromising their risk profile.
For example, risk associated with a consumer who has two tradelines – an auto loan and a single credit card – may be difficult to score using conventional credit risk methodologies. The current snapshot doesn’t offer enough insight to evaluate future payment behavior. Historical trended account information changes this because we can now see over two years of history on those two tradelines. With this insight we can effectively turn two data points into more than 48 data points, giving lenders more information that demonstrates credit behavior and likelihood to repay. Account history data over time with payment amount and ratio are new assets that influence a more advanced score, giving lenders the power to confidently score and say, “yes” to more consumers.
TransUnion recently published the Score Savvy Insight Guide to inform lenders of the new elements now being leveraged in credit risk scores.
The guide also provides insight into scoring a greater population of consumers, and how to achieve better segmentations across risk bands – giving lenders the ability to confidently approve more consumers.