Credit Scores

Credit Bureau Connection partners with Clarity Services to enhance consumer history analysis

CLEARWATER, Fla. - 

Credit Bureau Connection (CBC) and Clarity Services have partnered to provide dealers and finance companies what the service providers say is a first-of-its-kind, comprehensive view of a consumer’s credit history.

The companies explained exclusive subprime credit data combined with existing traditional credit bureau information are being used to enhance credit reports and compliance solutions for Credit Bureau Connection’s customers. Clarity insisted its non-traditional credit data provides a unique insight into consumer credit behavior that is not available from the traditional credit bureaus.

“Lenders and buy-here, pay-here dealers who exclusively use traditional bureau scores are missing a wealth of information that could have a huge impact on underwriting or lending decisions,” the companies said. “This partnership gives lenders greater access to information they need to mitigate their risks and better understand their applicants.”

By incorporating Clarity’s data, dealers will be able to more accurately price and structure deals with profitable contract terms while managing default risk.

“I’m excited about our partnership with Clarity Services,” said Mike Green, president and chief executive officer of CBC. “This partnership goes beyond just providing credit reports. It will provide additional insight into a consumer’s file that will change the industry as we know it.

“The industry needs this now more than it ever has,” Green continued. “The additional benefit of non-traditional credit data bundled with CBC’s robust credit report and compliance suite, will elevate subprime dealers to new heights.”

With an increasing number of consumers having subprime credit scores, CBC and Clarity sense that more finance companies and partners within the credit industry are accepting the necessity of more comprehensive information to determine an applicant’s intent to pay.

For California-based CBC and its partners, Clarity’s data provides a new level of confidence in financing.

“We are excited about the partnership with Credit Bureau Connection, an industry leader in credit reports and compliance solutions,” said David Elmore, vice president of auto finance and strategic accounts at Clarity Services.

“The partnership between Clarity Services and CBC provides a unique opportunity to improve underwriting and lending efficiency for thousands of subprime auto dealers,” Elmore continued. “Leveraging Clarity data will provide CBC’s customers with the most comprehensive and robust view of the subprime consumer in the industry.”

New York governor and AG take aggressive actions over Equifax breach

NEW YORK - 

Two of the highest ranking officials in New York are using the Equifax security breach to intensify actions within the Empire State, bringing Experian and TransUnion into the matter, too.

On Tuesday, Gov. Andrew Cuomo directed the New York Department of Financial Services to issue new regulation making credit reporting agencies register with New York for the first time and comply with what the state has called a first-in-the-nation cybersecurity standard.

Then on Wednesday, New York Attorney General Eric Schneiderman announced that his office has sent formal inquiries regarding data security to Experian and TransUnion following the Equifax data breach that potentially exposed the personal information of 143 million consumers.

“A person’s credit history affects virtually every part of their lives, and we will not sit idle by while New Yorkers remain unprotected from cyberattacks due to lax security,” Cuomo said.

“The Equifax breach has left millions of New Yorkers vulnerable to identity theft and major financial issues,” Schneiderman said. “Credit reporting agencies have a fundamental responsibility to protect the personal information they’re entrusted with.

“As we continue our investigation into the Equifax breach, it’s vital to ensure that consumer data at the other major credit reporting agencies is safe,” Schneiderman added.

Under the proposed regulation, all consumer credit reporting agencies that operate in New York must register annually with DFS beginning on or before Feb. 1 and by Feb. 1 of each successive year for the calendar year thereafter. The registration form must include an agency’s officers or directors who will be responsible for compliance with the financial services, banking, and insurance laws and regulations.

The annual reporting obligation contained within the proposal also provides the DFS Superintendent with the authority to deny and potentially revoke a consumer credit reporting agency's authorization to do business with New York’s regulated financial institutions and consumers if the agency is found to be out of compliance with certain prohibited practices, including engaging in unfair, deceptive or predatory practices.

“The data breach at Equifax demonstrates the necessity of strong state regulation like New York’s first-in-the-nation cybersecurity actions,” Department of Financial Services superintendent Maria Vullo said. “This is one necessary action of several that DFS will take to protect New York's markets, consumers and sensitive information from criminals.”

The DFS Superintendent may refuse to renew a consumer credit reporting agency's registration if the superintendent finds that the applicant or any member, principal, officer or director of the applicant, is not trustworthy and competent to act as or in connection with a consumer credit reporting agency, or that the agency has given cause for revocation or suspension of such registration, or has failed to comply with any minimum standard.

The proposed regulation also subjects consumer reporting agencies to examinations by DFS as often as the superintendent determines is necessary, and prohibits agencies from the following:

—Directly or indirectly employing any scheme, device or artifice to defraud or mislead a consumer.

—Engaging in any unfair, deceptive or predatory act or practice toward any consumer or misrepresent or omit any material information in connection with the assembly, evaluation, or maintenance of a credit report for a consumer located in New York State.

—Engaging in any unfair, deceptive, or abusive act or practice in violation of section 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

—Including inaccurate information in any consumer report relating to a consumer located in New York State.

—Refusing to communicate with an authorized representative of a consumer located in New York State who provides a written authorization signed by the consumer, provided that the consumer credit reporting agency may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the consumer.

—Making any false statement or make any omission of a material fact in connection with any information or reports filed with a governmental agency or in connection with any investigation conducted by the superintendent or another governmental agency.

In addition, every credit reporting agency must comply with the department’s cybersecurity regulation, on phased in schedule of compliance, starting April 4.

DFS’ cybersecurity regulation requires banks, insurance companies and other financial services institutions regulated by DFS to have a cybersecurity program designed to protect consumers' private data; a written policy or policies that are approved by the board or a senior officer; a chief information security officer to help protect data and systems; and controls and plans in place to help ensure the safety and soundness of New York's financial services industry.

“Oversight of credit reporting agencies will help ensure that personal information is less vulnerable to cyberattacks and other nefarious acts in this rapidly changing digital world,” Cuomo said. “The Equifax breach was a wakeup call and with this action New York is raising the bar for consumer protections that we hope will be replicated across the nation.”

And Schneiderman wants to know what Experian and TransUnion are doing, as well.

In letters sent to the CEOs of the two companies, the attorney general’s office asks them to detail:

—The security measures that were in place before they learned of the Equifax breach

—Steps the companies have taken since learning of the breach to ensure that they haven’t already suffered similar intrusions and won’t experience breaches moving forward

—How they will further assist consumers in protecting their personal information

Schneiderman is seeking the answers to these questions by Sept. 21 and a meeting with top executives at Experian and TransUnion by Sept. 28.

Early fallout of Equifax breach that might impact 143 million consumers

CARY, N.C. - 

From lawmakers to law firms, Equifax now is in the middle of a financial hurricane as the credit bureau announced late on Thursday that a cybersecurity incident potentially impacted approximately 143 million U.S. consumers.

In its announcement, Equifax said criminals exploited a U.S. website application vulnerability to gain access to certain files. Based on the company’s investigation, the unauthorized access occurred from mid-May through July. 

The company added that has found no evidence of unauthorized activity on Equifax's core consumer or commercial credit reporting databases.

Equifax said the information accessed primarily includes names, Social Security numbers, birth dates, addresses and, in some instances, driver's license numbers.  In addition, credit card numbers for approximately 209,000 U.S. consumers, and certain dispute documents with personal identifying information for approximately 182,000 U.S. consumers, were accessed, according to the company’s announcement.

As part of its investigation of this application vulnerability, Equifax also identified unauthorized access to limited personal information for certain U.K. and Canadian residents. Equifax said it will work with U.K. and Canadian regulators to determine the appropriate next steps. 

The company also noted has found no evidence that personal information of consumers in any other country has been impacted. 

Equifax indicated that it discovered the unauthorized access on July 29 of and acted “immediately to stop the intrusion.” The company said it promptly engaged a leading, independent cybersecurity firm that has been conducting a comprehensive forensic review to determine the scope of the intrusion, including the specific data impacted.

Equifax also reported the criminal access to law enforcement and continues to work with authorities.  While the company’s investigation is substantially complete, it remains ongoing and is expected to be completed in the coming weeks.   

"This is clearly a disappointing event for our company, and one that strikes at the heart of who we are and what we do. I apologize to consumers and our business customers for the concern and frustration this causes,” Equifax chairman and chief executive officer Richard Smith said.

“We pride ourselves on being a leader in managing and protecting data, and we are conducting a thorough review of our overall security operations,” Smith continued. “We also are focused on consumer protection and have developed a comprehensive portfolio of services to support all U.S. consumers, regardless of whether they were impacted by this incident.”

By lunchtime on Friday, more than a half dozen shareholder rights law firms push out announcements regarding their own investigations. Attorney John Yanchunis of ClassAction.com and Morgan & Morgan already had filed a class action lawsuit against Equifax in the Northern District of Georgia.

Part of what is intensifying plaintiff attorneys’ efforts is what San Diego-based firm Johnson Fistel highlighted. It’s what a pair of high-level Equifax executives did, according to regulatory filings.

“(These filings) show on Aug. 3, just days after the July 29 breach discovery, chief financial officer John Gamble sold shares worth $946,374 and Joseph Loughran, president of U.S. information solutions, exercised options to dispose of stock worth $584,099,” Johnson Fistel said in a news release.

On Capitol Hill, members of Congress want more answers, too. And not just from Equifax. Rep. Ted Lieu, a California Democrat, is seeking a U.S. House Judiciary Committee hearing.

“In light of recent events, I request the committee call upon representatives from the Big 3 credit reporting agencies — Experian, TransUnion and Equifax — to testify not only on the breach that occurred in May 2017, but also to identify how each company is taking proactive, defensive steps to prevent such breaches in the future,” Lieu said.

“Congress has a strong role to play in preventing such attacks on our financial and IT infrastructure, and must hold those entrusted with our most sensitive data to account,” he added.

Equifax went on to say that it has engaged a leading, independent cybersecurity firm to conduct an assessment and provide recommendations on steps that can be taken to help prevent this type of incident from happening again.

“I’ve told our entire team that our goal can’t be simply to fix the problem and move on. Confronting cybersecurity risks is a daily fight. While we’ve made significant investments in data security, we recognize we must do more. And we will," Smith said.

FactorTrust partners with Enova Decisions to bolster consumer credit availability

ATLANTA - 

This week, alternative credit data provider FactorTrust announced a partnership with predictive analytics and digital decisioning company, Enova Decisions, to integrate FactorTrust’s proprietary data into its Colossus digital decisioning platform.

Executives highlighted the integration will strengthen Enova Decisions’ platform with additional proprietary data that will result in improved automated, real-time operational decisions for its customers.

Chicago-based Enova Decisions supports numerous industries, including financial services, telecommunications and higher education. The company’s data-driven solutions can help clients in the financial services industry specifically improve their operational decisions instantly and at scale.

“FactorTrust is proud to assist industry leaders like Enova Decisions with their data needs,” FactorTrust chief executive officer Greg Rable said. “Our alternative credit data enables their clients to gather the full picture on likely consumers, thereby extending appropriate credit options to consumers that may otherwise not receive it — a shared goal of FactorTrust and Enova Decisions.”

In its 14-year history, Enova, parent company to Enova Decisions, has extended more than $19 billion in credit to nearly 5 million customers around the world, using Enova Decision’s advanced analytics and decisioning technology.

“Adding additional non-traditional data is important to our overall data integration strategy,” Enova Decisions chief analytics officer Joe DeCosmo said. “FactorTrust’s proprietary data helps fill in the gaps that traditional data can’t provide—and contributes to our analysis of consumer data in real-time through our tailored analytics, AI and decisioning technology.

“This further enables our clients to quickly transform their underwriting, offers, payments decisions and more, to deliver a better customer experience and improve business performance,” DeCosmo added.

FactorTrust again among Inc. 5000

In other company news, FactorTrust was named one of the fastest-growing private companies in the U.S. by Inc. 5000. For the second consecutive year, not only was the company the only private, alternative credit bureau to make the list, but it was also ranked the eighth fastest-growing financial services firm in Georgia.

This is the fourth year FactorTrust has been named to the list for its significant growth in revenue and company size. The list represents a unique look at the most successful companies within the American economy’s most dynamic segment— its independent small and midsized businesses. The average company on the list achieved a three-year growth of 481 percent.

“Our growing team of industry champions set us on the path to unprecedented growth in both revenue and innovation in recent years,” Rable said. “Our team’s expertise, coupled with better recognition of the impact of alternative credit data for evaluating creditworthiness of underbanked consumers, is driving FactorTrust as the leading alternative credit reporting and analytics agency.”

The Inc. 5000’s aggregate revenue is $206 billion, and the companies on the list collectively generated 619,500 jobs over the past three years. Complete results of the Inc. 5000, including company profiles and an interactive database that can be sorted by industry, region, and other criteria, can be found at www.inc.com/inc5000.

“The Inc. 5000 is the most persuasive evidence I know that the American Dream is still alive,” Inc. president and editor in chief Eric Schurenberg said. “The founders and CEOs of the Inc. 5000 tell us they think determination, risk taking, and vision were the keys to their success, and I believe them.”

Ford Motor Credit leverages machine learning to enhance underwriting, reduce risk

LOS ANGELES - 

Ford Motor Credit and ZestFinance recently announced the results of a study that measured the effectiveness of machine learning to better predict risk in auto financing and potentially expand auto financing for millennials and other Americans with limited credit histories.

As a result of the study’s success, Ford Credit said it is developing plans to implement machine learning credit approval models to further enhance its consistent and prudent lending practices across the credit spectrum.

“At Ford and Ford Credit, our primary goal is to serve our customers,” Ford Credit chairman and chief executive officer Joy Falotico said. “For this study, we worked with ZestFinance to harness the capability of machine learning to analyze more data and to analyze our data differently.

“The study showed improved predictive power, which holds promise for more approvals, enhanced customer experiences and even stronger business performance, including lower credit losses,” Falotico continued.

The captive explained that Ford Credit’s proprietary models have performed well for decades. The machine learning study compared results from a Ford Credit scoring model with a machine learning model developed by ZestFinance, using its underwriting platform to do deeper analysis of applicant data.

Ford Credit and ZestFinance found that machine learning-based underwriting could reduce future credit losses significantly and potentially improve approval rates for qualified consumers, while maintaining its consistent underwriting standards.

According to the Consumer Financial Protection Bureau, 26 million American adults, or about one in 10, have no credit record, making them difficult and often impossible to underwrite using traditional methods. This includes millions of millennials who are also part of the fastest-growing segment of new car buyers.

Although these consumers may have steady jobs, officials insisted their creditworthiness is heavily based on credit history. This makes it more difficult for companies to provide financing, and they could miss an opportunity for revenue growth.

Last year, the captive pointed out that new vehicles purchased by millennials represented 29 percent of all U.S. sales, and that number is expected to grow to 40 percent by 2020.

“Machine learning-based underwriting will be a game-changer for lenders, opening entirely new revenue streams. Millennials offer the perfect example. They are typically a good credit risk and are expected to command $1.4 trillion in spending by 2020, but many lack the financial history needed to pass a traditional credit check,” ZestFinance founder and CEO Douglas Merrill said.

“Applying better math and more data to traditional underwriting illuminates the true credit risk and helps forward-looking companies like Ford Credit continue to grow their businesses while predictably managing their risk,” Merrill added.

The companies also highlighted that machine learning tools can analyze data more deeply and in more detail. They also are capable of “learning” over time, for example, by proposing changes to variables as patterns evolve or emerge, or by recognizing and incorporating macroeconomic changes into their assessments.

ZestFinance is now offering the Zest Automated Machine Learning (ZAML) Platform, which it developed specifically for credit underwriting. ZAML uses complex algorithms to analyze thousands of data points to provide a richer, more accurate understanding of all potential borrowers, delivered in an easy-to-use Web interface.

The ZAML Platform consists of three components: data collection and assimilation, machine learning modeling tools and transparency tools that enable companies to explain credit decisions.

“The work with ZestFinance exemplifies the innovation efforts at Ford Credit to support Ford Motor Company and its customers,” the captive said.

“Financial technology is key to many of these efforts, as fintech can contribute to an even more seamless and better personalized vehicle financing experience for consumers,” the company went on to say.

Lobel Financial boosts underwriting with FactorTrust data

ATLANTA - 

On Friday, FactorTrust announced the addition of Lobel Financial to its growing list of financial service companies implementing its alternative credit data into their credit decisioning process.

Lobel Financial, a finance company specializing in purchasing and servicing vehicle installment contracts from independent and franchised dealers, is using FactorTrust data in a custom scorecard to augment other in-house credit strategies.

The company selected FactorTrust to implement its alternative credit data to help them achieve more lift and better separation of good and poor credit performers.

“We looked closely at what FactorTrust could offer, and decided that its many attributes, delivered in real-time, would help us best reach our goal of establishing enhanced segmentation for the development of our new internal scorecard,” Lobel Financial president Harvey Lobel said.

Lobel Financial joined finance companies such as National Auto Lenders leveraging FactorTrust’s information.

“Using alternative credit data is a proactive choice for industry leaders like Lobel Financial, who are faced with the challenge of effectively and intelligently managing risk on the underbanked market,” FactorTrust chief executive officer Greg Rable said.

“The addition of FactorTrust’s proprietary data opens up their options in determining the best credit performers for their business. It allows a complete picture of consumers, who are often considered credit invisible, but are really just credit inaccurate due to lack of data,” Rable added.

What 71% of adults think is in their credit history

ATLANTA - 

Here is more evidence as to why customers sitting across the desk from you might be frustrated the rate attached to their installment contract isn’t as favorable as they expect. A new survey from FactorTrust indicated most U.S. adults do not understand what is and what is not included in their credit history, and therefore impacting their credit scores.

Out of 2,279 U.S. adults surveyed, the results showed 71 percent assumed that major credit bureaus are including all consumer credit history, including non-traditional payments like short-term loans, online, rent-to-own and more. This survey, conducted by Radius Global Market Research in June and commissioned by FactorTrust, showcased the disconnection between consumers and their own credit data.

“Consumers and lenders are facing realities when it comes to credit histories generated by the Big 3 bureaus,” FactorTrust chief executive offier Greg Rable said. “The true nature of their payment habits is not accurately being reflected in their credit profiles, because the alternative loans they are taking out and repaying on time are not included.

“It’s no surprise there are so many misperceptions around what constitutes a consumer’s credit profile and why lenders are seeking new and progressive methods to develop better ways to learn about the consumers they serve, or could be serving,” Rable continued.

FactorTrust asserted the omission of certain types of alternative data, like short-term loans and rent-to-own payments, means that consumers who successfully repay these non-traditional loans do not receive the credit they deserve. But, 72 percent of U.S. adults believe finance companies and other lenders would be more likely to consider a consumer for a loan with information about all of their loans, including alternative credit data.

In addition, 68 percent of U.S. adults who participated say their credit history would improve if it incorporated all of their payments including non-traditional loans (short-term, personal, online, rent-to-own).

These same participants also have misunderstandings about their credit data and the lack of alternative data included in credit history and scores. FactorTrust pointed out that 33 percent of U.S. adults believe that non-traditional payments (online loan, housing, rental) are included in their credit score.

The survey was conducted online within the United States by Radius Global Market Research on behalf of FactorTrust June 26 through 28 among 2,279 adults age 18 and older in the United States. The results were weighted to the U.S, census for age, gender, region and income.

New Experian credit tool aimed at streamlining mobile process

COSTA MESA, Calif. - 

A recent Experian survey found that 21 percent of consumers said they would consider purchasing a vehicle in the next six months if they could shop credit offers and apply via mobile device quickly and securely.

As a result, Experian on Tuesday unveiled Text for Credit, what the credit bureau is calling an industry-first technology that transforms the way consumers secure credit.

The company acknowledged traditional means of obtaining credit often can be slow and tedious, and providing sensitive information on paper in public spaces can expose consumers to risk.

Experian explained Text for Credit can allow consumers to initiate and complete the credit application process within minutes with a simple text message. For instance, consumers interested in taking advantage of a store credit card incentive can secure that card through their mobile device — a particularly exciting innovation considering smartphone ownership is nearing 100 percent for adults aged 18 to 44.

“Technology has brought vast improvements to consumer banking, insurance and investing services, but the credit application process has remained largely unchanged,” said Alex Lintner, Experian’s president of consumer information services.

“With Text for Credit, consumers will get real-time access to credit, creating a better experience for the consumer and increased conversion for lenders and businesses,” Linter continued.

In that Experian survey, consumers were asked to identify their top three concerns about applying for credit or financing in a retail location. More than half (58 percent) cited privacy concerns, and 42 percent cited the length of time it takes to apply. These concerns translate to lost revenue — 12 percent of consumers said they have walked away from a purchase because it was taking too long to get approved for credit, while 16 percent have walked away because the person in front of them was applying for credit.

Then Experian shared additional information with SubPrime Auto Finance News about consumer sentiment regarding auto financing and how Text for Credit can help dealerships and finance companies.

Consumers cited a car as their most stressful purchase — and much of that stress is attributable to figuring out financing. Experian asked consumers to rank the most stressful elements of car buying:

—High pressure sales tactics

—Negotiating price

—Cost of car

—Dealing with salesperson/finance manager to arrange financing

—The amount of time it takes to complete the purchase

—Wondering if you could get a better deal through different financing

—Choosing a model

Moreover, as mentioned previously, Experian pointed out that 21 percent of survey participants said they’d consider purchasing in the next six months if they could quickly and securely shop credit offers and apply via mobile device. Experian noticed that a vehicle was the second most popular item consumers were willing to purchase if they could quickly and securely shop for credit offers via mobile device.

Experian asked participants to select their top three concerns about applying for offers on the spot at a retailer.

—Privacy concerns about applying in-store (58 percent)

—Being over leveraged (55 percent)

—How long it takes to apply (42 percent)

—Dirty looks from customers in line behind you (31 percent)

—Fear of being declined in public (27 percent)

—Having to interact with a salesperson to apply (28 percent)

—The anxiety it causes while in the store (20 percent)

Experian followed up by asking if consumers could obtain the same credit securely through a mobile device, within minutes, would it ease concerns?

—Yes (47 percent)

—No (53 percent)

Thinking just about a buying car, Experian asked participants what elements are the most stressful. They’re ranked in order below from most stressful to the least stressful.

1. High pressure sales tactics

2. Negotiating price

3. Cost of car

4. Dealing with salesperson/finance manager to arrange financing

5. The amount of time it takes to complete the purchase

6. Wondering if you could get a better deal through different financing

7. Choosing a model

Experian reiterated that Text for Credit offers the speed, convenience and privacy necessary to solve these issues. The company maintained it’s as simple as it sounds:

• Consumers seeking credit text a keyword such as “CREDIT” to a short code supplied by a merchant or a credit issuer, the same way some retailers now allow consumers to “text to buy.”

• Consumers then receive a text message response that takes them to a hosted website where they can apply, review credit offers and receive an instant decision.

• In most cases, consumers will be recognized by their device credentials, which lets them avoid filling out a lengthy credit application.

• If approved, consumers will have immediate access to the credit via a barcode or account details sent to their device.

“Experian is taking the credit industry into the real-time economy with this innovative, convenient and confidential new way to apply for credit. For consumers, Text for Credit means no more paperwork, no more anxious minutes hoping for credit approval and dramatically reduced risk from a paper-extensive exchange of sensitive information,” Lintner said.

“In fact, consumers can find out what they qualify for before they come to a dealership or a retail store, and that can translate to big sales increases,” Linter went on to say.

Finance companies and dealerships interested in offering Text for Credit can visit www.experian.com/TextforCredit.

FactorTrust applauds CFPB for examining ‘credit invisibles’

ATLANTA and WASHINGTON, D.C. - 

Here’s a change of pace: An auto finance industry participant supporting an action by the Consumer Financial Protection Bureau.

FactorTrust said that it backs the CFPB for examining findings that bring to light the plight of credit invisibles in their transition to establish credit.

Earlier this month, CFPB released a study on the transition to credit visibility that found that the way consumers establish credit history can differ greatly based on economic background. The bureau indicated consumers in lower-income areas are more likely than those in higher-income areas to become credit visible due to negative records such as a debt in collection. Consumers in higher-income areas are more likely than those in lower-income areas to establish credit history by using a credit card or relying on someone else. 

The study also found that the percentage of consumers transitioning to credit visibility due to student loans more than doubled in the last 10 years. 

“It is no secret that lower-income consumers face challenges in the financial marketplace,” CFPB director Richard Cordray said. “Today’s study shows that even at the beginning of their financial lives, they are faced with higher hurdles to gain access to credit, which hinders them from turning their version of the American dream into reality.”

In 2015, CFPB estimated that 11 percent of adults in the United States, or about 26 million people, are credit invisible with no credit history at one of the three nationwide credit reporting companies. Traditionally, a credit history reflects whether payments are made on time, what debt a consumer owes, and whether they have a debt or bill in collection.

Finance companies use a consumer’s credit history to decide whether to extend credit and how much the credit will cost. Without a sufficient credit history, consumers can face barriers to accessing credit or higher costs.

The CFPB asserted this issue disproportionately impacts consumers who are African American or Hispanic, and people who live in low-income neighborhoods. It can also impact some recent immigrants, young people just getting started, and people who are recently widowed or divorced.

FactorTrust has long provided alternative credit data, analytics and risk scoring information that finance companies need to make informed decisions about underbanked consumers (less than 700 credit scores) and credit invisibles, which the CFPB identifies as about 11 percent of U.S. adults (or 26 million people) — with no credit history at the Big 3 credit bureaus.

In its recent comment to the CFPB’s request for information (RFI) on the use of alternative data and modeling techniques in the credit process, FactorTrust contends, however, that consumers can become equally visible with positive payment behaviors not reported to the Big 3 bureaus.

For instance FactorTrust found that 57 percent of underbanked consumers had a comprehensive debt to income (DTI) ratio of less than 50 percent. For these consumers, less than half of their income was earmarked for loan payments. Lower DTI typically indicates a lower-risk consumer who is better positioned to responsibly take on new financial obligations.

Furthermore, FactorTrust noted that consumers with lower DTI, had a higher share of debt payments residing outside of the Big 3 bureaus, in alternative credit bureaus like FactorTrust.

“The data we collect from alternative lenders is not reported to the Big 3 bureaus and enables visibility into the creditworthiness of underbanked consumers,” FactorTrust chief executive officer Greg Rable said. “Not only can we look to data points in our database to outline positive payment scenarios, but we can collect it in real-time, versus the monthly timeframe of the Big 3 bureaus.

Alternative lending tends to have shorter loan terms than traditional lending options, which makes reporting of on-time payments and other data accessible around the clock to lenders, enabling them to make smarter, faster decisions about the creditworthiness of credit invisibles,” Rable continued.

The CFPB study also looked at how consumers first establish credit history by reviewing de-identified credit records of more than 1 million consumers who became credit visible. The bureau examined when consumers transition out of credit invisibility and the means by which they do so.

The study found that almost 80 percent of transitions occur before age 25 and that credit cards are the most common way consumers establish credit. The study also found that the way consumers establish credit history — taking out a credit card, relying on a co-borrower or having negative records — can differ greatly based on economic background.

The entire CFPB study can be found here.

FactorTrust & GOLDPoint Systems partner to boost originations & more

ATLANTA - 

FactorTrust recently finalized an innovative partnership with GOLDPoint Systems to integrate alternative credit data and scores into the online finance company’s originating, servicing and reporting processes, thereby enabling GOLDPoint’s lending clients to get a complete overview of creditworthy borrowers.

GOLDPoint Systems is a loan origination and servicing system that can enable lenders to fund loans with full-service decisioning support. The company is integrating FactorTrust’s alternative credit data services and scores into their platform for lenders.

“Traditional data sources do not accurately portray a comprehensive profile of all consumers, particularly those with credit scores less than 700,” FactorTrust chief executive officer Greg Rable said. “To gain more insights and intel on potential customers, it is imperative to pair highly predictive alternative credit data with traditional data.

“This partnership allows GOLDPoint Systems to do just that, enhancing their consumer lenders’ opportunities to better identify the right loan candidates,” Rable continued.

GOLDPoint Systems can provide solutions to help consumer lenders across verticals approve and fund loans faster and smarter.

“Our fully customizable products allow lending institutions of all types to grow and increase their revenue,” said Glen Twede, vice president, sales and marketing, GOLDPoint Systems. “Partnering with FactorTrust and integrating their alternative credit data means we can expand on that capability.”

FactorTrust has long-provided alternative credit data, analytics and risk scoring information that lenders need to make informed decisions about consumers. It is differentiated from the Big 3 bureaus by its more than 250 million unique, behavioral and transactional data points untapped by these traditional sources.

For more information on FactorTrust, visit www.FactorTrust.com or call (866) 910-8497.