TransUnion made quite a claim about the new solution it rolled out on Thursday, a tool that can combine both time-series credit bureau data and alternative data sources. One of the leaders of TransUnion’s team that spent more than 10 months creating the tool insisted the CreditVision Link risk score can assess the likelihood of a new, non-mortgage account reaching 90 days past due or worse within 12 months after scoring.

The company explained CreditVision Link can allow finance companies to score up to approximately 95 percent of the U.S. adult population because that combination of both traditional credit bureau data and alternative data sources can create a more precise picture of consumer risk and their ability to manage financial commitments. 

“If a lender is doing business in the traditional credit score cutoff of 700, what I would say is we’re seeing this score change the risk tier by more than one grade on about 45 percent of the population,” TransUnion’s senior vice president of alternative data services Mike Mondelli told SubPrime Auto Finance News during a phone interview before the solution launch.

“If you think about that, that’s every impactful,” Mondelli continued. “What that means is you’ve got people moving either up or down along the credit scale. The majority are moving up, but not in every single case if they haven’t been paying other bills. But what you’re seeing is the impact is you would make a different decision almost half the time if you incorporate this score into your credit criteria. Now it wouldn’t necessarily be an approve or decline change, but you would make a different offer to that consumer about half the time.

“To me, that’s pretty telling. It’s going to impact a big percentage of the applicants that are being scored with this score,” he went on to say.

The combination of the data within CreditVision Link was designed to allow users to score with far more precision.  Many current customers and applicants of financial institutions may be assessed as lower credit risks, receive more beneficial pricing or possibly switch from a decline to an approval when this score is applied.

Through recent testing of the solution by a major auto finance company, TransUnion identified up to 24 percent more approvals for the institution.  Due to the lender’s increased booking rates, the lender could potentially have a 5.7-percent to 11.5-percent increase to its portfolio size. 

Additionally, financial institutions can now lend to emerging credit populations with greater insight. TransUnion acknowledged these groups are often denied by finance companies or subject to less favorable lending terms because they don’t have sufficient data on their credit files.  In fact, more than 60 million traditional “no-hits” and unscorable records can be scored using CreditVision Link.

“Nearly six in 10 Americans are struggling financially, according to recent CFSI research.  Knowing this, it is more important than ever to deliver innovative solutions such as CreditVision Link that increase lender confidence and consumer access to quality financial services,” Mondelli said.

“Whether top-tier banks, community institutions, insurance carriers or specialty lenders, our customers continue to look for better ways to serve the many millions of Americans seeking a firmer financial foothold,” he continued. “We are proud of a distinguished record that combines both innovation and speed to market, and ultimately leads to better outcomes for our customers and consumers alike.”

Beyond the necessary back-end database infrastructure, Mondelli also mentioned tool builders made sure CreditVision Link is compliant with the Fair Credit Reporting Act. As a result, Mondelli emphasized both TransUnion as well as finance companies of all sizes now can have a compliant solution that can meet the demands of state and federal regulators as well as the possibility of consumers raising questions about how the score was determined.

The scores leverage both time-series data and alternative databases of more than 3 billion non-traditional data records collected on over 260 million adult Americans.  CreditVision Link’s alternative data assets include property, tax and deed records, checking/debit account and payday lending information among other sources.

TransUnion pointed out these alternative data sources have proven to accurately score more than 90 percent of applicants who otherwise would be returned as no-hit or thin-file by traditional models.  This lift was based on 20 validations already performed by TransUnion with some of the nation’s leading lending institutions. 

Time-series data assets leverage an expanded view of credit data on each consumer that includes up to 30 months of historical information on each loan account, including payment history, such as dollars paid, and amount paid versus minimum due.  It also includes the total amount borrowed over time.

As of now, the solution doesn’t have the capability of integrating rental or utility payment performance into the score, but Mondelli pledged that TransUnion is working toward that goal since the company already had a rental market solution.

“There’s just some challenges in terms of getting enough of that data to make it meaningful. Both the utilities and the rental screening agencies are pretty fragmented from a market perspective,” Mondelli said.

“Getting enough records, say 20 million or 30 million, is pretty difficult. You’re left with a lot of gaps. We don’t have that data in here yet, but we’re working to aggregate it to scale,” he continued. “Once we can do that and manage it correctly and transparently if the consumers wants to dispute it if there’s a difference of opinion we will incorporate it.

“What I think we’ve done is built a terrific first foundation that’s leaps and bounds above what’s in the marketplace now,” Mondelli went on to say. “It gives us a starting point to bring in other data that’s meaningful over time to continue to complement the traditional credit bureau data and give lenders more transparency and accuracy with which they should make decisions.

TransUnion is in various stages of testing CreditVision Link with a diverse set of customers that includes several large financial, auto and consumer lending institutions. Early validation results indicate that incorporating CreditVision Link in an underwriting strategy significantly outperforms traditional risk scores and adds considerable lift to both risk assessment and universe expansion strategies.

“TransUnion is the first single source of scores utilizing both credit and alternative data, which makes it easier for lenders to accurately evaluate the risk associated with all consumers,” Mondelli said.  “The combined data assets are especially valuable for lenders to better assess similarly-scored customers as the additional information will help determine which consumers may be better risks than others.

“We’re very excited for a variety of reasons,” he continued. “We think we’ve got a terrific solution to go in and talk with our clients about and they’re going to be extremely pleased when they test it. We see the impact that we can have on these consumers is profound in terms of getting access to credit to a significant percentage of that 60 million of that previously unscored population and moving about 20 million of those consumers from a non-prime to a prime status. That’s rewarding.

“I would say we’re definitely excited about bring a terrific tool to our clients. But we’re equally if not more so excited about the impact we’re going to have on the economy and frankly for underserved consumers going forward,” Mondelli added.

For more information about TransUnion’s alternative data solutions, visit http://e.transunion.com/altdata.