The term “data-driven decisions” communicates the value of using vast volumes of data to support business decisions. Data from retail purchases, web browsing, manufacturing processes, and just about any other activity that generates high volumes of data are prime for analysis. When properly analyzed, the insight obtained can then be applied to improve products, services, and processes. That includes the ability to identify trends that would otherwise go undetected—trends that include credit increases, decreases, stability, seasonal cycles, and outliers, all of which describe the past and help predict the future.
In addition to their universally-used credit scores, credit bureaus such as TransUnion now offer trended credit data reports that include up to 30 months of credit card data. These trended credit data reports include credit limits, balances, minimum payments due, actual payments, late payments, and amounts past due for each of the months reported. Together with an applicant’s credit score, a trended credit data report paints a more accurate picture of a borrower’s financial position by detailing their spending habits and ability to repay.
Trended Credit Data Reports Reveal Financial Behaviors
A single credit score can facilitate quick decisioning. Excellent scores receive immediate approval and the best terms. Good scores may undergo a quick underwriter review to structure an appropriate deal. If subprime is your focus, poor scores are matched with credit policies to minimize risk. Very poor scores are likely auto-declined. However, when making your loan origination decisions solely on credit scores, you’re actually assuming some hidden risk and missing out on lending opportunities. Let’s see how trended credit data reports help improve loan origination decisions through detailed insight into applicants’ financial behaviors.
Excellent Score, On the Decline
The trended credit data report for an applicant with an excellent credit indicates that during the past 18 months, the monthly balance of one tradeline increased an average of $540 per month and the borrower has been paying only the minimum due each month. Another tradeline indicates a similar trend, though the monthly increase is less. Both of these payment trends are a stark contrast to the prior 12 months payments, when balances were paid in full each month.
Conclusion: The applicant is facing some financial headwinds and may present more risk than the credit score alone indicates.
Good Score, Staying the Course
A trended credit data report for an applicant with a good credit score shows consistency in the past 24 months of credit card usage. With the exception of two late payments in the previous year, monthly balances were paid in full.
Conclusion: The applicant’s credit score is confirmed by the trended data. Match the applicant to your credit policies and offer a competitive deal.
Not as Poor as the Score
A trended credit data report for an applicant with a poor credit score actually shows the applicant’s financial position is quickly improving. The most recent 18 months of payment data indicate the applicant has opened up a new credit card (branded airline). Monthly balances have been increasing by an average of $175 and the cardholder pays the required amount in full each month.
Conclusion: The applicant is a much better risk than indicated by the credit score. Offer better terms than the credit score alone would dictate.
Explore a few additional examples of the value and benefits of trended credit data reports by watching the How to Use Trended Data in Your Loan Approval Process webinar now.
Trended Credit Data Reports Reduce Risk and Increase Opportunity
The combination of credit score and a trended credit data report gives lenders a better understanding of an applicant’s financial behavior. Trended credit data reports can confirm that an applicant’s credit score is accurate—or show a discrepancy between the credit score and their current financial standing. In all cases, trended credit data reports reduce the risk of lending decisions and let lenders structure deals based on a clearer understanding of risk. For applicants with poor credit scores, trended credit data reports can increase lending opportunities by revealing an applicant’s improving financial position, letting lenders extend credit that would have otherwise been denied based solely on a credit score.
defi SOLUTIONS loan origination software experts make it easy to incorporate trended credit data reports into your lending process. Improve the quality and confidence of your lending decisions while reducing risk by contacting our team today or registering for a demo of defi LOS.
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