CREDIT RISK CASE STUDY - Auto Finance News

CREDIT RISK CASE STUDY

AUTO FINANCE

PROBLEM

? A national non-prime auto finance company extending billions in loans was looking for a better way of avoiding bad loans that were deeply cutting into their bottom line.

? Their costs for each of these bad loans was averaging around $2,500 based on diminished value and repossession.

? To enable dealers to sell more cars, they needed a deeper dive into the subprime candidate pool without creating adverse business conditions and remaining FCRA compliant.

SOLUTION

? The company reached out to FactorTrust, a FCRA regulated credit reporting agency, with over 17 million non-prime consumers in a database that is growing by hundreds of thousands each month and is highly predictive of their payment performance.

? Unlike the Big 3 Credit Bureaus, FactorTrust provides key consumer information on loans not reported to the Big 3 and includes unique data such as Employment Data, Stability Data, Loan Performance and Bank Payment Data.

THE TEST

? This national non-prime auto finance company conducted an extensive retro analysis of accounts that had been underwritten using traditional credit bureau data and other alternative data sources.

? Once they began utilizing FactorTrust, they found the data qualified consumers positively, and equally important, it identified loans they should not approve.

? When they compared their internal custom scorecard, the FICO score and the FactorTrust Non-Prime Auto Score, they determined the FactorTrust data outperformed FICO when consumers were within the proprietary database.

? The company also found the FactorTrust data and Non-Prime Auto Score not only provided the ability to drastically reduce the number of bad loans but also provided insights for swap-in strategies.

T H E R E S U LT S

? The company experienced a 50 percent reduction in First Payment Default within six months of incorporating FactorTrust attributes and scores into their decisioning.

? Based on the test, the expected FactorTrust "hit rate" was approximately 30 percent. Consumers present in the FactorTrust database were 50 percent more likely to default on auto payments compared to consumers not in the database.

? In processing 100,000 applications monthly, this company realized a monthly cost savings of more than $200,000 which included the data acquisition costs by avoiding bad loans and the associated costs.

ABOUT FACTORTRUST NON-PRIME DATA AND AUTO SCORES

FactorTrust is the leading non-prime credit bureau providing consumer and credit history information not reported to the Big 3 credit bureaus. Data is obtained from our lender contributors in realtime or daily. The result is unique and proprietary data and auto finance risk scores on non-prime consumers including loan, employment, income, consumer stability and ACH performance data in addition to about 400 data attributes in real-time.

Note: The information shared in this case study is real and the results were provided by an actual FactorTrust customer. While FactorTrust believes and has observed this case study is consistent with results of other FactorTrust customers, there is no guarantee these results will be found for your specific application.

FactorTrust, The Alternative Credit Bureau, helps lenders give underbanked consumers the credit they deserve by providing the most comprehensive source of alternative credit information not available from the Big 3 bureaus.

WS.BANKLOGIC | 844.205.4111 | SALES@

The Alternative Credit Bureau

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