Non-Prime Opportunities Drive Dramatic Auto Loan Growth

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Their credit may not be perfect, but they are bankable and eager to buy. They are the 40 percent of potential car buyers with credit scores under 680. By tapping new sources of alternative data, non-prime opportunities like these can be properly evaluated and added to a prudent auto loan portfolio. And the timing couldn’t be better.

Through July, the National Automobile Dealers Association is reporting year-to-date new vehicle sales are up over 8 percent compared to last year. The National Consumer Credit Trends Report by Equifax indicates that delinquency rates for auto loans through June of this year have decreased by more than 11 percent. Meanwhile, new credit issued between January and April 2013 was $152.7 billion — an increase of more than 13 percent compared to the same period in 2012, and an eight-year high.

With smart non-prime lending decisions, you can lap the competition.

Identifying qualified buyers

Sophisticated new data mines are uncovering huge non-prime opportunities. Rather than relying on traditional banking metrics, qualified consumers can be assessed using alternative data. Innovative analytics can reveal the most credit-worthy consumers among 25 million previously undetected potential buyers. Bottom line: These are consumers who pay their bills on time.

Data sources include:

  • Utilities payment history
  • Rent information
  • Cell phone payments
  • Short-term loan history

It is a hidden market of qualified buyers, and often overlooked by lenders who focus solely on low-hanging fruit. But tapping this tremendous buying power doesn’t have to be complicated or time consuming.

Looking beyond the traditional credit file

Big data is transforming consumer markets. Non-prime opportunities can now be identified with crystal clarity. Consumers whose credit scores suffer due to recession-triggered financial setbacks are eager to repair their credit reputation. Using information beyond the traditional credit report to assess risk has become a more precise and efficient process. Data that was previously unavailable or took days to access can now be available in hours or minutes.

Equifax research reveals that different lending products require different risk prediction models. A risk metric utilized for bankcards does not necessarily transfer as an effective formula for auto loan analysis.

By utilizing this alternative data, loans can be more effectively priced, risk more effectively measured and credit quality better identified. The solution comes just in time to catch the surging wave of consumer demand. For more information on Equifax Automotive Solutions, please visit:  http://www.equifax.com/automotive/en_us

About Jenn Reid

Jenn joined Equifax Automotive Services from the auto lending industry, where she spent the past six years focused on both the manufacturer and indirect lending channels. She brings over 13 years of automotive experience, working for both dealerships and automotive finance companies, along with a degree in Automotive Marketing and Management from Northwood University. Jenn’s background in both the lender and dealer space allows her to understand the needs of the automotive market, and ensures our solutions are meeting client needs.