Alternative Lenders to Gain Greater Predictive Power with TransUnion CreditVision Link Short-Term Risk Score
Blend of alternative and traditional credit attributes offers alternative lenders more information on subprime consumers
The opportunity for alternative credit and small dollar loans remains high with a market size that approaches $40 billion annually. To help these lenders better segment risk in an increasingly competitive market, TransUnion (NYSE: TRU) introduced today the CreditVision Link Short-Term Risk Score.
This new predictive risk scoring model, tailor-made for alternative lenders, combines traditional and alternative data to offer a holistic picture of consumers. Information about the benefits of this new risk score will be highlighted during TransUnion’s webinar, Alternative Loan Insights with TransUnion Risk Scores, scheduled for 1 p.m. CDT on August 30.
The Short-Term Risk Score allows lenders to better segment and evaluate consumer risk profiles and identifies consumers with a good track record across the alternative and traditional credit markets. This provides alternative lenders with greater predictive power and a more thorough understanding of loan applicants and their payment behaviors, resulting in enhanced underwriting decisions.
“Nearly 75% of consumers active in the alternative credit market have one or more open traditional tradelines. Alternative credit data alone does not provide a comprehensive view of subprime consumers or tell their whole story, but when combined with traditional, particularly trended data, it can yield powerful results,” said Liz Pagel, vice president of consumer lending market strategy at TransUnion. “Understanding whether a consumer is making payments on her traditional credit is valuable information for alternative lenders.”
In late 2017, TransUnion acquired FactorTrust, Inc., an alternative credit bureau serving alternative lenders. The new score builds upon FactorTrust’s powerful legacy risk scores, while harnessing the power of both traditional and alternative credit data to help lenders better understand the consumer’s full risk profile. This arms lenders with integral information for assessing risk.
FactorTrust’s robust alternative credit database includes FCRA-compliant, proprietary information on alternative loans, a major category of credit obligations not reflected in the traditional credit file. The Short-Term Risk Score is developed on alternative loan performance outcomes exclusively sourced from the alternative credit database.
Alternative lenders continuously furnish information on alternative loan originations, payments, delinquencies, inquiries and consumer stability, which are captured in alternative credit attributes used as inputs to the scoring model. The risk score variants are tailored for short-term, installment and virtual rent-to-own (VRTO) markets, providing alternative lenders with more precision than generic risk scoring models.
Combining the alternative credit data with traditional static and trended credit data allows alternative lenders to recognize consumers’ good behavior across both markets, thereby expanding their buy boxes without taking on additional risk.
To learn more about the CreditVision Link Short-Term Risk Score, please click here to register for the webinar, Alternative Loan Insights with TransUnion Risk Scores, on August 30.
TransUnion is a leading global risk and information solutions provider to businesses and consumers. The company provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed its solutions into their process workflows to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. Consumers use its solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. www.transunion.com
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