Data and Analytics

Differentiated Data Provides Clarity for Portfolio Reviews

Differentiated Data Provides Clarity for Portfolio Reviews

October 29, 2020 | Craig Sims

Differentiated Data is Even More Critical in 2020

Consumer spending has picked up slightly since the summer lockdowns across many regions of the U.S.  A recent report from the Commerce Department illustrated how consumer spending rose 1.0% in August after a 1.5% bump in July 1. The government’s fourth-quarter growth estimates1 for the economy are expected near 2.5%, signaling a continued trend upward from earlier this year. Spending on automotive has been somewhat of a bright spot this summer and during the fall. The annual pace of vehicle sales in August reached approximately 15 million units, up from a low of nearly 8 million back in April2. 

It Has Become Harder to See Individual Credit Health

The COVID-19 pandemic slowed economic growth in a way that’s different from past recessions. As a result, consumers have been impacted in different ways. While some have increased savings and lowered debt, others have lost their jobs or experienced salary reductions.

Therefore, lenders are having a much more difficult time identifying a person’s true financial capacity to repay their loans to mitigate portfolio risk.

Especially this year, it’s important for lenders to have access to advanced data. This will allow them to make the right decisions on a portfolio. Whether prime, subprime, thin or invisible credit, the financial impact of COVID-19 has shifted loan risk levels to include all consumers, regardless of segment or score.

Lenders need to leverage sophisticated differentiated data assets together to provide the most comprehensive, fullest insights on consumer financial profiles.

The Importance of Regular Portfolio Reviews

A regular portfolio refresh and review offers the updated, expanded view lenders need to better understand their customers’ past and present financial behavior.

Advanced data resources help lenders receive tailored, highly specific details that assess consumer credit behaviors during fast-changing market conditions.

This information can help to assess risk and opportunity through access to a multitude of credit attributes from all three credit bureaus. Furthermore, it can help lenders understand future trajectories of accounts with trended data that shows an individual customer’s credit behavior over a 24-month period. Lenders also have the option to leverage key trends that may indicate a consumer’s likelihood to be delinquent or default on their debt obligations. This can inform credit line management, loan or payment modification, collections and contact prioritization, as well as credit reissue decisioning. 

Identifying Risk Levels, Spotting Growth Potential

Information that is specific to each account helps lenders proactively identify risk and opportunity at key stages of the account lifecycle. Additionally, they can confidently make decisions that help maximize profitability and ROI, while helping minimize losses, fraud and compliance issues.

Lenders can help reduce losses and risk exposure when they conduct a regular, interval-driven portfolio review. It allows them to monitor the creditworthiness of existing accounts so they can take strategic action. Additionally, lenders can monitor changes in important credit trends. For example, they can see where growth patterns shift between prime and subprime accounts. As a result, lenders can use this data to change the portfolio strategy. They can determine the proper level of funding for debt reserves and portfolio credit mix. Lastly, they can segment and identify existing customers for growth opportunities such as determining a customer’s creditworthiness for an existing credit line increase. 

A regular portfolio review is important for lenders, regardless of the state of the economy and automotive industry. This activity can help lenders mitigate risk in their portfolio and identify opportunities for expansion and profit. With advanced technologies that help lenders gain better insight and understanding of each customer. And, they will gain a competitive edge and maximize their profit potential. Learn more about the Equifax automotive solutions.




3: Equifax U.S. National Consumer Credit Trends Report: Originations; data as of Sept. 13, 2020