All posts by Laura Burrows
Consumer credit trends are continuously changing, making it imperative to keep up with the latest developments in originations, delinquencies on mortgages, credit cards and auto loans. By monitoring consumer behavior and market trends over time, you can predict and prepare for potential issues within each market. In this 30-minute webinar, our featured speakers, Gavin Harding, Experian Senior Business Consultant, and Alan Ikemura, Experian Data Analytics Senior Product Manager, reveal Q1 2019 market intelligence data and explore recent advances in consumer credit trends. Watch our on-demand webinar
Millions of consumers lack credit history and/or have difficulty obtaining credit from mainstream financial institutions. To ease access to credit for “invisible” and below prime consumers, financial institutions have sought ways to both extend and improve the methods by which they evaluate borrowers’ risk. This initiative to effectively score more consumers has involved the use of alternative credit data.1 Alternative credit data is FCRA-compliant data that is typically not included in a traditional credit report and is used to deliver a more complete view into a consumer’s creditworthiness. “Alternative credit data helps us paint a fuller picture of a consumer so they can get better access to the financial services they need and deserve,” said Alpa Lally, Vice President of Data Business at Experian. Experian recently sponsored the FinovateSpring conference in San Francisco, where Alpa had a chance to sit down with Jacob Gaffney, Editor-in-Chief of the HousingWire News Podcast, to discuss ways consumers can improve their credit scores. As an immigrant, Alpa spoke personally about the impact of having a limited credit history and how alternative credit data can help drive greater access to credit for consumers and profitable growth for lenders through more informed lending decisions. Highlights include: How alternative and traditional credit data differ Types of alternative credit data being used by lenders How “credit-invisibles” can best leverage alternative credit data Alternative credit data product solutions, including Experian BoostTM Listen now 1When we refer to “Alternative Credit Data,” this refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA Data” may also apply in this instance and both can be used interchangeably.
Consumer credit trends and markets are constantly evolving, particularly when it comes to originations and delinquencies on mortgages, credit cards and auto loans. According to Experian research, over 2.7 million out of 89 million active automotive loans and leases are either 30 or 60 days delinquent. Triggers that signal a greater likelihood of consumers falling delinquent on loans, mortgages and credit card payments, include high-interest rates, a high utilization rate and recent derogatory trades. By tracking and forecasting consumer trends over time, you can more easily predict consumer behavior and better prepare for potential issues within each market. Join Gavin Harding, Experian Senior Business Consultant, and Alan Ikemura, Experian Data Analytics Senior Product Manager, during our live Quarterly Credit Trends webinar on May 30 at 2:00 p.m. ET. Our expert speakers will provide a view of the real estate market and share insights on the latest consumer credit trends. Highlights include: 2019 economic drivers Q1 2019 origination and delinquency trends Mortgage Home equity Bankcard Auto Register now
Your consumers’ credit score plays an important role in how lenders and financial institutions measure their creditworthiness and risk. With a good credit score, which is generally defined as a score of 700 or above, they can quickly be approved for credit cards, qualify for a mortgage, and have easier access to loans with lower interest rates. In the spirit of Financial Literacy Month, we’ve rounded up what it takes for consumers to have a good credit score, in addition to some alternative considerations. Pay on Time Life gets busy and sometimes your consumers miss the “credit card payment due” note on their calendar squished between their work meetings and doctor’s appointment. However, payment history is one of the top factors in most credit scoring models and accounts for 35% of their credit score. As the primary objective of your consumers’ credit score is to illustrate to lenders just how likely they are to repay their debts, even one missed payment can be viewed negatively when reviewing their credit history. However, if there is a missed payment, consider checking their alternative financial services payments. They may have additional payment histories that will skew their creditworthiness more so than just their record according to traditional credit lines alone. Limit Credit Cards When your consumers apply for a new loan or credit card, lenders “pull” their credit report(s) to review their profile and weigh the risk of granting them credit or loan approval. The record of the access to their credit reports is known as a “hard” inquiry and has the potential to impact their credit score for up to 12 months. Plus, if they’re already having trouble using their card responsibly, taking on potential new revolving credit could impact their balance-to-limit ratio. For your customers that may be looking for new cards, Experian TAPSSM can be used to accurately estimate your consumers spend on all general-purpose credit and charge cards, so you can identify where there is additional wallet share and assign their credit lines based on actual spending need. Have a Lengthy Credit History The longer your consumers’ credit history, the more time they’ve spent successfully managing their credit obligations. When considering credit age, which makes up 21% of their credit score, credit scoring models evaluate the ages of your consumers’ oldest and newest accounts, along with the average age of all their accounts. Every time they open new credit cards or close an old account, the average age of their credit history is impacted. If your consumer’s score is being negatively affected by their credit history, consider adding information from alternative credit data sources for a more complete view. Manage Debt Wisely While some types of debt, such as a mortgage, can help build financial health, too much debt may lead to significant financial problems. By planning, budgeting, only borrowing when it makes sense, and setting themselves up for unexpected financial expenses, your consumers will be on the path to effective debt management. To get a better view of your consumers spending, consider Experian’s Trended3DTM, a trended attribute set that helps lenders unlock valuable insights hidden within their consumers’ credit scores. By using Trended3DTM data attributes, you’ll be able to see how much of your consumers’ credit line they typically utilize, whether they tend to revolve or transact, and if they are likely to transfer a balance. By adopting these habits and making smart financial decisions, your consumers will quickly realize that it’s never too late to rebuild their credit score. For example, they can potentially instantly improve their score with Experian Boost, an online tool that scans their bank account transactions to identify mobile phone and utility payments. The positive payments are then added to their Experian credit file and increase their FICO® Score in real time. Learn More About Experian Boost Learn More About Experian TAPS
A court in a Northern China province has developed a mobile app designed to enforce court rulings and create a socially credible environment. The app, which can be accessed via WeChat, China\'s most popular instant messaging platform, is designed to alert users when they are within a 500-meter radius of someone in debt. Users will get personal information about the debtors, including their exact location, names, national ID numbers, and why they have a low score. It\'s the latest innovation to become integrated into China\'s social credit system. What is a social credit system? China\'s social credit system, which will be enforced in 2020, aims to standardize the social reputation of citizens and businesses. It will rank citizens by attaching a score to various aspects of their social life - ranging from paying court fees to drinking alcohol to failing to pay bills. Although there are proposed consequences for low scorers, including travel bans and loan declines, 80% of citizens recently surveyed by the Washington Post support it. While the app seems like it could be a plotline from a \"Black Mirror\" episode, with its emphasis on reputation scoring and location-based activation, there are reasons it makes sense for the rather remote northern province. With many people in China still not having formal access to traditional banks, being able to alternatively assess their trustworthiness and risk could provide them the ability to access loans, rent houses, and even send their children to school. Additionally, to increase their scores, Chinese citizens are displaying improved behavior. China isn\'t the first country to attempt to gain a robust understanding of its consumers through alternative data sources. While U.S. financial institutions have experimented with using social media as a factor in determining a borrower\'s risk, Philippines-based Lenddo, a world leader in scoring and identity verification technology, is doing that and more. The company looks at social media, email, and mobile headset activity to determine repayment ability. Moreover, Discovery Bank in South Africa believes there\'s a correlation between fiscal responsibility and physical health. The South African bank plans to begin tracking the habits of its 4.4 million customers and offering better deals to those who are living a healthier lifestyle. For example, consumers can earn points for visiting the gym, getting a flu shot, or buying healthy groceries. The more points a consumer collects the better deals and savings they\'ll receive. The willingness to share data is not a characteristic unique to South African or Chinese citizens. A recent Accenture study of 47,000 banking and insurance customers showed that consumers are willing to share personal data in exchange for better customer assistance and discounts on products and services. The full extent of the impact on social credit to Chinese citizens is impossible to calculate, simply because the system doesn\'t fully exist yet. However, it does serve as an example of the many ways that credit scoring and the use of customer-permissioned data are evolving. Long gone are the days of mailing checks, ordering from a catalog, or even needing to carry cash. What\'s next?
With the number of consumer visits to bank branches having declined from 52% of people visiting their bank branch on a monthly basis to 32% since 2015, the shift in banking to digital is apparent. Rather than face-to-face interaction, today’s financial consumers value remote, on-demand, services. They expect instant credit decisioning, immediate account funding, and around-the-clock customer assistance. To adapt, financial service providers see the necessity to respond to consumers’ growing expectations and become part of their overall digital lifestyle. Here are a few ways that financial services can adjust to changing consumer behavior: Drive mobile app activity With more than 50% of the world’s population actively using smartphones, the popularity of mobile banking apps has soared. Mobile apps have revolutionized the banking sector by facilitating easier communication between clients and institutions, offering value-added services, and introducing blockchain technologies. Consumers use mobile banking apps to pay bills, transfer funds, deposit checks, and make person-to-person payments. In fact, according to a study by Bank of America, more than 60% of millennials use mobile apps to make person-to-person payments on a regular basis! Financial institutions who launch new, or invest in enhancing existing mobile apps, can lower their overall costs, increase ROI, and maintain customer loyalty. Provide convenience and rewards CGI conducted a survey on emerging financial consumer trends, focusing on bank customers’ top requirements. Results confirmed that 81% of respondents expected to receive some form of an incentive from their primary banks. Today’s financial consumers may reasonably be won over by service offerings. They want rewards, limited fees, and convenience. As an example, Experian’s Text for CreditTM simplifies the credit process by providing customers with instant credit decisioning through their mobile devices. Personalized offers based on customer behavior can help enhance your brand and attract new customers. Stay connected Today’s consumers expect instant service and gratification. Consumers prefer to work with banks who offer accessible and responsive customer service. According to a recent NGDATA consumer banking survey, 41% of banking customers report that poor customer service is the primary reason they would leave their bank. Mintel suggests developing an omnichannel experience aligned with consumer media consumption. Stay connected with consumers through mobile apps, chatbots, social media, and email. Ensure that all interactions are relevant and helpful and immediately alert customers of any institutional issues or changes. The growing digital demands of consumers are influencing how people purchase banking, lending, and credit services. These changes are driving increased urgency for financial service institutions to adopt real-time financial processes that meet demands for convenience and speed. Interested in more best practices? Watch our On-Demand Webinar
The lending market has seen a significant shift from traditional financial institutions to fintech companies providing alternative business lending. Fintech companies are changing the brick-and-mortar landscape of lending by utilizing data and technology. Here are four ways fintech has changed the lending process and how traditional financial institutions and lenders can keep up: 1. They introduced alternative lending models In a traditional lending model, lenders accept deposits from customers to extend loan offers to other customers. One way that fintech companies disrupted the lending process is by introducing peer-to-peer lending. With peer-to-peer lending, there is no need to take a deposit at all. Instead, individuals can earn interest by lending to others. Banks who collaborate with peer-to-peer lenders can improve their credit appraisal models, enhance their online lending strategy, and offer new products at a lower cost to their customers. 2. They offer fast approvals and funding In certain situations, it can take banks and credit card providers weeks to months to process and approve a loan. Conversely, fintech lenders typically approve and fund loans in less than 24 hours. According to Mintel, only 30% of consumers find various banking features easy-to-use. Financial experts at Toptal suggest that banks consider speeding up the loan application and funding process within their online lending platforms to keep up with high-tech companies, such as Amazon, that offer customers an overall faster lending process from applications to approval, to payments. 3. They\'re making use of data Typically, fintech lenders pull data from several different alternative sources to quickly determine how likely a borrow is to pay back the loan. The data is collected and analyzed within seconds to create a snapshot of the consumer\'s creditworthiness and risk. The information can include utility, rent. auto payments, among other sources. To keep up, financial institutions have begun to implement alternative credit data to get a more comprehensive picture of a consumer, instead of relying solely upon the traditional credit score. 4. They offer perks and savings By enacting smoother automated processes, fintech lenders can save money on overhead costs, such as personnel, rent, and administrative expenses. These savings can then be passed onto the customer in the form of competitive interest rates. While traditional financial institutions generally have low overall interest rates, the current high demand for loans could help push their rates even lower. Additionally, financial institutions have started to offer more customer perks. For example, Goldman Sachs recently created an online lending platform, called Marcus, that offers unsecured consumer loans with no fees. Financial institutions may feel stuck in legacy systems and unable to accomplish the agile environments and instant-gratification that today\'s consumers expect. However, by leveraging new data sets and innovation, financial institutions may be able to improve their product offerings and service more customers. Looking to take the next step? We can help. Learn More About Banks Learn More About Fintechs
Smartphones connect us to the world of digital information while on the go. With just a few touches, you can browse the internet, get directions, video chat with friends, and even secure a last-minute date. So why not use your phone to apply for and secure credit? The number of unique mobile phone users reached 5.135 billion in 2018, according to HootSuite. That’s two-thirds of the world’s population! With mobile usage at an all-time high, embracing this channel for credit marketing only makes sense. With Text for CreditTM, lenders can invite consumers to explore personalized financial offers on their mobile devices. How AutoNation is Transforming the Car Buying Experience While car shopping should be exciting, it’s often a stressful and drawn-out experience, specifically when it comes to securing financing. AutoNation, an automotive retailer with over 300 retail outlets, saw an opportunity to leverage Text for Credit to enhance the consumer experience and speed up the car-buying process. What is Text for Credit? The consumer can initiate the prequalification or instant credit process simply by texting a keyword or short code. Our industry-first identification technology then recognizes the consumer’s device credentials, eliminating unnecessary data entry and bypassing the need to fill out a lengthy credit application. AutoNation wanted to generate prospects by offering consumers the opportunity to prequalify for an auto loan and shop for cars within their budget on their mobile devices. The retailer further nurtured consumers with an email campaign series leading them to schedule appointments and test drive vehicles. Marketing is a critical component to generating traffic, which helps initiate the Text for Credit process. A variety of channels and creative were tested to determine which was the highest performing, including paid Facebook and Instagram ads along with the AutoNation homepage. The results? Attribution conversion and overall conversion from top to bottom of funnel increased, as did social and website traffic. Text for Credit is just one product offering in Experian’s overall digital story. Our vision is to ultimately enable an ecosystem of services and capabilities through a mobile toolkit that grants consumers instant access to credit in a seamless manner. Read our case study for more insight on using Text for Credit to: Improve customer experience Drive site traffic Increase conversion rates Lower cost per acquisition Read the Case Study
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