5 points from FactorTrust’s non-prime survey


FactorTrust recently released findings from an industry-wide survey on the use of alternative data in the non-prime auto financing space, which indicate that alternative data is being more commonly used for underwriting purposes in this market.

The survey, sponsored by FactorTrust in conjunction with Connections Insights, investigated participants’ goals, uses and sources associated with alternative data in their overall credit strategies.

Highlights of the findings include:

—53 percent of respondents currently use alternative data in some capacity (“users”).

—19 percent of respondents are in the process of implementing or testing alternative data and 28 percent are exploring the use of alternative data (“explorers”), but have not taken the step of integrating it into business processes yet.

—Both users and explorers ranked mitigation of losses as the most common goal (88 and 100 percent, respectively) in using alternative data.

—Of the current users, 82 percent use alternative data in underwriting, for scorecard development specifically; the explorers plan to use it equally as an overlay to alternative data scores on existing scores and applicant verification.

—Tradeline data is the most often used or desired alternative data type among more than half of all respondents.

“These findings make it evident that the use of alternative data is now more mainstream than it is ‘alternative’ with non-prime auto financing companies,” said Connections Insights president Marguerite Watanabe, who performed the study.

FactorTrust chief executive officer Greg Rable added, “The results support our observations that all finance companies are either examining or integrating alternative data into their credit decisioning processes.

“The more performance data these companies have on potential customers — specifically, alternative credit data they can’t get from the Big 3 bureaus — the more effective their lending practices become, making them more competitive,” Rable went on to say.

The survey of non-prime auto financing sources was conducted by phone during March and April.

For the full survey findings, visit this website or call (866) 910-8497.