By: Kari Michel
Credit quality deteriorated across the credit spectrum during the recession that began in December, 2007. As the recession winds down, lenders must start strategically assessing credit risk and target creditworthy consumer segments for lending opportunities, while avoiding those segments where consumer credit quality could continue to slip. Studies and analyses by VantageScore® Solutions, LLC demonstrate that there are more than 60 million creditworthy borrowers in the United States – 7 million of whom cannot be identified using standard scoring models.
Leveraging methods using the VantageScore® credit score in conjunction with consumer credit behaviors can effectively identify profitable opportunities and segments that require increased risk mitigation thus optimizing decisions. VantageScore Solutions examined how consumers credit scores changed over a 12 month period. The study focused on three areas of consumer behavior:
- Stable: consumers that stay within the same credit tier for one year
- Improving: consumers that move to a higher credit tier in any quarter and remain at a high credit tier for the remainder of the timeframe
- Deteriorating: consumers that move to a lower credit tier in any quarter and remain at a lower credit tier for the remainder of the timeframe
Through a segmentation approach, using the three credit behaviors above and credit quality tiers, emerges a clearer picture into profitable segments for acquisitions and existing account management strategies. Download the white paper, “Finding creditworthy consumers in a changing economic climate”, for more information on finding creditworthy consumers from VantageScore Solutions.
Lenders can use a similar segmentation analysis on their own population to identify pockets of opportunity to move beyond recession-based management strategies and intelligently re-enter into the world of originations and maximize portfolio profitability.
