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Updated November 17th Related Posts Link to automotive form, business form

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Discover how data and analytics can enhance deposit growth strategies, improve customer engagement, and drive financial wellness for banks and credit unions.

By: Teri Tassara The intense focus and competition among lenders for the super prime and prime prospect population has become saturated, requiring lenders to look outside of their safety net for profitable growth.  This leads to the question “Where are the growth opportunities in a post-recession world?” Interestingly, the most active and positive movement in consumer credit is in what we are terming “emerging prime” consumers, represented by a VantageScore® of 701-800, or letter grade “C”. We’ve seen that of those consumers classified as VantageScore C in 3Q 2006, 32% had migrated to a VantageScore B and another 4% to an A grade over a 5-year window of time.  And as more of the emerging prime consumers rebuild credit and recover from the economic downturn, demand for credit is increasing once again.  Case in point, the auto lending industry to the “subprime” population is expected to increase the most, fueled by consumer demand.  Lenders striving for market advantage are looking to find the next sweet spot, and ahead of the competition. Fortunately, lenders can apply sophisticated and advanced analytical methods to confidently segment the emerging prime consumers into the appropriate risk classification and predict their responsiveness for a variety of consumer loans.  Here are some recommended steps to identifying consumers most likely to add significant value to a lender’s portfolio: Identify emerging prime consumers Understand how prospects are using credit Apply the most predictive credit attributes and scores for risk assessment Understand responsiveness level The stops and starts that have shaped this recovery have contributed to years of slow growth and increased competition for the same “super prime” consumers.  However, these post-recession market conditions are gradually paving the way to opportunistic profitable growth.  With advanced science, lenders can pair caution with a profitable growth strategy, applying greater rigor and discipline in their decision-making.

Some borrowers who are deemed subprime by traditional credit scoring criteria are actually quite creditworthy and are identified as prime or near-prime consumers when using the more inclusive VantageScore® credit score. Based on a VantageScore® Solutions’ study of infrequent users of credit, 15.5 percent were found to have either prime or super-prime risk. In addition, among new entrants to the credit scene — including students who recently graduated, immigrants and recently divorced consumers — 26.5 percent were found to have either prime or super-prime risk profiles. Learn more about VantageScore® Solutions, identified as a Preferred Partner by the National Association of Federal Credit Unions (NAFCU). Source: VantageScore Solutions summer 2012 newsletter, The Score VantageScore® is owned by VantageScore Solutions, LLC.

Last week, a group of us came together for a formal internal forum where we had the opportunity to compare notes with colleagues, hear updates on the challenges clients are facing and brainstorm solutions to client business problems across the discipline areas of analytics, fraud and software.   As usual, fraud prevention and fraud analytics were key areas of discussion but what was also notable was how big a role compliance is playing as a business driver.  First party fraud and identity theft detection are important components, sure, but as the Consumer Financial Protection Bureau (CFPB) gains momentum and more teeth, the demand for compliance accommodation and consistency grows critical as well.  The role of good fraud management is to help accomplish regulatory compliance by providing more than just fraud risk scores, it can help to: Know Your Customer (KYC) or Customer Information Program (CIP) details such as the match results and level of matching across name, address, SSN, date of birth, phone, and Driver’s License. Understand the results of checks for high risk identity conditions such as deceased SSN, SSN more frequently used by another, address mismatches, and more. Perform a check against the Office of Foreign Asset Control’s SDN list and the details of any matches. And while some fraud solutions out there make use of these types of comparisons when generating a score or decision, they may not pass these along to their customers.  And just think how valuable these details can be for both consistent compliance decisions and creating an audit trail for any possible audits.