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 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.
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.
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.
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.
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 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.
FactorTrust recently released its enhanced Triggers solution, which provides tools to notify finance companies and other lenders of specific consumer behaviors on an ongoing basis and identifies the right-party contact information for collection and recovery efforts.
The company explained that Triggers are alerts for pre-specified consumer events or changes reflected on FactorTrust’s credit database that indicates a consumer is in the market for a certain product, is recently eligible for a product, or passed a certain risk threshold, prompting the lender to take action.
The next generation of Triggers enhances the lender’s ability to monitor consumer files and quickly respond with offers or actions to enable growth, reduce potential loss and streamline collections efforts. The new version’s enhanced features for account management and collections include:
—New customer file management functionality with an ability to download lists of all consumers being monitored
—Five new event triggers
—Additional output fields for payment type and frequency, and bank account numbers
—Weekly summary emails to customers
“Our experienced team of data and analytics experts are continuously increasing ease and usefulness of our products and offerings, with our customers in mind,” FactorTrust chief executive officer Greg Rable said in a news release.
“The upgraded features of Triggers enable lenders interested in monitoring customer accounts to not only help to reduce losses, but also grow their portfolios more efficiently.”
For more information on FactorTrust, visit www.FactorTrust.com or call (866) 910-8497.
Dealership compliance auditing firm Total Dealer Compliance (TDC) recently launched its virtual training platform: a solution aimed at helping stores mitigate risk faced by proactive regulators to create a culture of compliance at a fraction of the cost.
TDC claims to be charging roughly 80 percent less than its competitors for these virtual compliance training modules to enable dealers to be fully compliant with federal regulations across their sales, BDC, F&I, fixed ops, HR and IT departments.
TDC president Max Zanan explained this virtual compliance program comes at an impactful time for dealerships looking to strengthen their reputation and incorporate a culture of compliance without breaking the bank. Zanan said compliance is essential in today’s dealership environment as the count grows to 17,540 franchised dealerships and independent stores composing a level triple that number.
“With both the FTC and OSHA increasing fines for compliance violations, the cost for non-compliant car dealers average $792,000 loss per year in profit,” Zanan said. “Car dealers should proactively seek a solution that provides peace of mind and promises defensible proof of compliance to both auditors and executives.”
TDC’s virtual compliance training is readily available to all dealerships and includes the following:
• Comprehensive online training modules for each department and employee of the dealership
• Cloud-based e-learning platform with analytic reporting
• End of course assessment and certification
TDC’s virtual compliance training costs are based on user/employee headcount:
• Up to 25 employees: $699 annually
• Up to 50 employees: $1,299 annually
• Up to 100 employees: $2,499 annually
“As the nation’s leader in auto dealer compliance solutions and services, we are so proud to finally be able to provide this robust compliance training online and at a much lower price point than our competitors,” Zanan said.
“Compliance is essential to today’s dealership environment,” he continued. “With our courses updated throughout the year and both affordable and easily accessible, we are excited to help car dealers safeguard their business, mitigate risks and increase their profits.”
More details can be found by visiting www.totaldealercompliance.com or calling (888) 243-5204.
VantageScore Solutions — developer of the VantageScore credit scoring model — recently released a white paper that found that credit score models can maintain accuracy and predictive power even if certain negative data such as tax liens, civil judgments, and medical and non-medical collections are removed from consumer credit files.
The paper, “Negative Data Suppression and the Impacts on Credit Score Models,” anticipates potential model-development questions raised under the National Consumer Assistance Plan (NCAP). Spearheaded by the three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion — the NCAP is focusing on a variety of measures aimed at making credit-data reporting more accurate and understandable for consumers.
The CRCs are still making a final determination about the measures to be included in the NCAP, which is scheduled for full implementation by March 2018, but so far the recommendations are expected to include removal from consumer credit files of all civil-judgment records, a substantial number of tax liens, and medical-related agency collections less than 180 days old. When included in credit files, these data are predictive of default risk, so most modern credit-scoring models take them into consideration. Such changes could impact a lender's customer acquisition and/or portfolio management processes.
Recognizing this, VantageScore said it embarked on research to discover how the removal of this credit-file data could impact scoring-model accuracy and the ability to develop high-performing models in the future.
Using two million anonymized consumer credit files and a methodology detailed in the white paper, VantageScore developed two scoring models for comparison — one based on credit files containing all the negative data NCAP may exclude and the other based on credit files with all NCAP-related data removed. A comparison of scores obtained by scoring the same population with both models revealed the following findings:
—Despite the predictive value of negative data that would be omitted under NCAP, credit score models can certainly recover predictive performance in their absence.
—In fact, by adopting new variables more closely aligned to current credit-usage behavior — as opposed to the “backward-looking” historical events that NCAP would exclude — models developed in the absence of NCAP data may prove more stable than older models.
—Consumers who scored above 660 using model designs that accommodate NCAP data suppression exhibited better credit-management habits and more stable loan portfolios than their counterparts scored using models built using the negative file data.
—Regulatory focus on eliminating negative data under NCAP, along with the findings outlined above, suggests lenders should evaluate incumbent scoring models to ensure they will perform well in the absence of NCAP-related data.
“In light of the potential for significant changes to these data as a result of the NCAP, lenders must evaluate their scoring models to understand expected outcomes as the CRCs move ahead with their plans," said Sarah Davies, senior vice president of research, analytics and product development at VantageScore Solutions.
“This paper demonstrates that there is an opportunity to provide some relief for consumers whose scores are affected by these data while also preserving model performance,” Davies continued.
For more details on the study, visit VantageScore.com/NegativeData to download the white paper.
