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WHICH CREDIT BUREAU DATA SHOULD AUTO LENDERS USE?

The defi Team defi INSIGHT, defi LOS

credit bureau data auto lenders

When’s the last time you thought about your credit bureau data? If you’re like most auto lenders, you usually don’t have to think about it. You use the same data you’ve always used; no need to make any changes. The bureau call is already locked into the origination process and works fine. In flush times of booming business that might be fine, but the current auto lending marketplace is highly competitive. You can miss opportunities by relying on bureaus’ standard credit scoring. Variations in scoring among the major credit bureaus may be depriving lenders of profitable new customers. An applicant’s score from one bureau could result in an auto-decline, while a score 30 points higher from another bureau could result in a favorable deal structure. Lenders can also use alternative credit data resources available from Equifax, Experian, and TransUnion to identify lending opportunities that otherwise would have been missed.

Credit Scores: The Primary Decision Criteria

Credit scores are the primary filter or decision criterion for lenders. Superprimes can be fast-tracked to an optimum deal structure. Subprimes that don’t match credit policies can be immediately declined and issued an adverse action. Auto lenders who use a single credit bureau have established and predictable methods of matching scores to policies. However, credit score variations between bureaus can affect an applicant’s ability to obtain a loan or determine the terms of the loan.


A credit rating could vary by as many as 100 points between bureaus. There are many reasons for the variations in scores—missing information, old data, timeliness of reporting information to the bureaus. Using a single bureau can work to a lender’s (and borrower’s) advantage or disadvantage. A difference of 50 points can affect a superprime borrower’s terms. The lowest of the three scores would result in a higher interest rate, while the highest of the three scores would qualify the subprime applicant for better terms and increase the likelihood of capturing the loan.

Credit Bureau Data: Auto Lenders Should Use All Three Sources

Although using a single bureau has cost advantages and simplifies credit decisioning, the additional cost of using two additional bureaus should actually be seen as an investment in improving a lender’s chances of booking a loan. In light of auto sales that appear to have peaked and the corresponding competition for loans, using data from all three major bureaus:

 

  • Gives applicants a better chance of obtaining a loan with the best available rates;
  • Provides lenders information to make the best possible lending decisions; and
  • Improves decision confidence, ideally leading to a greater number of captured loans.

Bureau calls to Equifax, Experian, and TransUnion may just be the quickest way to boost your competitive strength.

Credit Bureau Data: Auto Lenders Can Easily Integrate All Three

With a modern loan origination solution, it’s easy to make calls to the three credit bureaus. Pre-integration makes it possible to quickly incorporate automatic calls to these bureaus during the loan origination process. Automation and decision rules enable lenders to evaluate the scores, along with assessing other applicant attributes, and determine the best match for credit policies.

Credit Bureaus Now Offer More Than Scores

Auto lenders interested in maximizing lending opportunities should also consider utilizing additional sources of consumer information provided by Equifax, Experian, TransUnion. The bureaus gather and aggregate a wide range of consumer information such as utility and mobile phone payments, payday loans, microloan activity, real estate, liens, foreclosures, and address stability. This alternative credit data can complement traditional credit scores or be used independently to evaluate an applicant’s financial strength. Compared with a credit score, alternative credit data can:

 

  • Provide a more detailed assessment of borrower risk. A credit score is a snapshot in time. Alternative data shows payment trends that indicate improving or declining financial strength. They can also demonstrate that a one-time payday loan was a low-risk anomaly that was quickly repaid.
  • Enable lenders to evaluate the risk of applicants with no credit score or those with “thin” credit files who would otherwise be ignored based solely on a no-hit score. Market segments with these characteristics can be a profitable source of new lending opportunities.

The benefits of using alternative credit data in lending decisions are too significant to ignore. With a wider range of consumer data lenders can make data-driven decisions that lead to new opportunities while minimizing risk.

 

Interested in learning more about the value of payment trends revealed by alternative credit data? Invest a few minutes to view the webinar How to Use Trended Data in Your Loan Approval Process.

Credit Bureau Data: Auto Lenders Make Better Decisions  

Auto lenders need the full range of credit data sources to improve their competitive positions. Credit bureau data from Equifax, Experian, TransUnion, and alternative credit data resources help lenders make the best lending decisions. You’ll improve your chances of booking loans while minimizing portfolio risk.

 

 

Getting Started

defi SOLUTIONS loan origination solutions are pre-integrated with all the credit bureaus and their alternative credit data services. Maximize your lending opportunities while minimizing risk by contacting our team today or registering for a demo of defi LOS.

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