Tag: loans

Quick Summary: Leasing continues to increase in the electric vehicle (EV) market. EVs accounted for nearly 20% of all new vehicle leases in Q4 2024, up from only 2.11% of new vehicle leases four years ago in Q4 2020. With consumers looking for flexibility—both in monthly payment and model availability—we’re seeing leasing continue to surge in the electric vehicle (EV) market. According to Experian’s State of the Automotive Finance Market Report: Q4 2024, EVs accounted for 19.5% of all new vehicle leases this quarter, up from 11.7% last year and a substantial increase from 2.1% in Q4 2020. Diving a bit deeper, data found EVs accounted for 9.3% of all new purchases in Q4 2024. Of those EVs, 50.1% were leased, while 38.9% were financed through loans. With lease payments for EVs ultimately being more affordable compared to loans and the excitement of driving the latest models packed with advanced technology, it’s no surprise we’re seeing leasing grow in popularity. Top leased EVs: How do lease and loan payments compare? As more consumers transition to EVs and manufacturers introduce new options to their lineup, certain models have become top choices for those opting to lease. Tesla accounted for the top two leased EVs in Q4 2024, with Tesla Model 3 coming in at 12.2% and Tesla Model Y at 9.1%. However, the Honda Prologue followed closely at 8.8% this quarter. Rounding out the top five were Hyundai IONIQ 5 (6.9%) and Chevrolet Equinox EV (5.9%). It’s notable that leasing has traditionally been a value-driven option for consumers, and the same holds true in the EV market. Leasing continues to offer lower monthly payments, making the finance option stand out for those looking to test an EV before purchasing or simply wanting the latest model on the lot. In Q4 2024, the average payment difference between a loan and a lease was $175. Though, the average monthly payment to lease a non-luxury EV was $504 this quarter, noting a $205 difference compared to the $709 loan payment. By comparison, the average monthly payment between a loan and leased luxury EV was $98—coming in at $842 for a lease and $940 for a loan. As more consumers choose to lease EVs, automotive professionals in both new and used markets have a chance to capitalize on this trend. By leveraging this data, those in the new retail market can effectively reach the right audience, while those in the used market can stay ahead of the curve and prepare for the influx of off-lease models in the coming years. To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q4 2024 presentation on demand.

 With nearly seven billion credit card and personal loan acquisition mailers sent out last year, consumers are persistently targeted with pre-approved offers, making it critical for credit unions to deliver the right offer to the right person, at the right time. How WSECU is enhancing the lending experience As the second-largest credit union in the state of Washington, Washington State Employees Credit Union (WSECU) wanted to digitalize their credit decisioning and prequalification process through their new online banking platform, while also providing members with their individual, real-time credit score. WSECU implemented an instant credit decisioning solution delivered via Experian’s Decisioning as a ServiceSM environment, an integrated decisioning system that provides clients with access to data, attributes, scores and analytics to improve decisioning across the customer life cycle. Streamlined processes lead to upsurge in revenue growth   Within three months of leveraging Experian’s solution, WSECU saw more members beginning their lending journey through a digital channel than ever before, leading to a 25% increase in loan and credit applications. Additionally, member satisfaction increased with 90% of members finding the simplified process to be more efficient and requiring “low effort.” Read our case study for more insight on using our digital credit solutions to: Prequalify members in real-time at point of contact Match members to the right loan products Increase qualification, approval and take rates Lower operational and manual review costs Read case study

Reporting positive rental payment histories to credit bureaus has been in the news more than once in recent months. In early November, Freddie Mac announced it will provide closing cost credits on multifamily loans for owners of apartment properties who agree to report on-time rental payments. In July, California began requiring multifamily properties that receive federal, state or local subsidies to offer each resident in a subsidized apartment home the option of having their rental payments reported to a major credit bureau. And while reporting positive rental payments to credit bureaus may not yet be part of the multifamily mainstream, forward-thinking operators have already been doing it for years. Below is a quick primer on this practice and its benefits. Why do renters need this service? A strong, positive credit history is critical to securing car loans, credit cards and mortgages – and doing so at favorable interest rates. Unfortunately, unlike homeowners, apartment residents traditionally have not seen a positive impact on their credit reports for making their rent payments on time and in full, even though these payments can be very large and usually make up their largest monthly expense. In fact, renters are seven times more likely to be credit invisible – meaning they lack enough credit history to generate a credit score – than homeowners, according to the Credit Builders Alliance (CBA). This especially impacts lower-income households and communities of color. Renters make up approximately 60% of the U.S. households that make less than $25,000 a year, while Black and Hispanic households are twice as likely as White households to rent, according to the CBA. Experian is among the organizations working with the Consumer Data Industry Association (CDIA) on the association's Rental Empowerment Project. Through the REP, CDIA and its partner organizations seek to increase the reporting of rental payment history information by landlords and property managers through the development and adoption of a uniform, universal data reporting format for landlords and property managers to use. How does reporting positive rental payments to credit bureaus have an impact on a resident's credit history? The impact on any individual renter will obviously vary because of a wide array of factors. But to get some sense of the potential impact reporting on-time rental payments can have, consider the results of the CBA's Power of Rent Reporting pilot. In that test, 100% of renters who started off with no credit score became scorable at the near prime or prime level. In addition, residents with subprime scores saw their score increase by an average of 32 points. How does reporting positive rent payments benefit rental-housing owners and operators? Reporting positive rental payments provides residents with a powerful incentive to pay their rent on time and in full. And because there’s not a huge percentage of apartment communities currently doing this, helping residents build their credit history in this manner can offer a real competitive advantage. Learn more

When running a credit report on a new applicant, you must ensure Fair Credit Reporting Act (FCRA) compliance before accessing, using and sharing the collected data. The Coronavirus Aid, Relief, and Economic Security (CARES) Act has impacted credit reporting under the FCRA, as has new guidance from the Consumer Financial Protection Bureau (CFPB). Recent updates include: The CARES Act amended the FCRA to require furnishers who agree to an “accommodation,”1 to report the account as current, although it is permitted to continue to report the account as delinquent if the account was delinquent before the accommodation was made. Although not legally obligated, data furnishers should continue furnishing information to the credit reporting agencies (CRAs) during the COVID-19 crisis, and make sure that information reported is complete and accurate. Below is a brief FCRA-related compliance overview2 covering various FCRA requirements3 when requesting and using consumer credit reports for an extension of credit permissible purpose. For more information regarding your responsibilities under the FCRA as a user of consumer reports, please consult your Legal Counsel and the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA handbook located on our website. Before obtaining a consumer report you have…  Reviewed your federal and state regulations and laws related to consumer reports, scores, decisions, etc.  Made sure you have a valid permissible purpose for pulling the consumer report.  Certified compliance to the CRA from which you are getting the consumer report. You have certified that you complied with all the federal and state requirements. After you take an adverse action based on a consumer report you… Provide the consumer with an oral, written or electronic notice of the adverse action. Provide written or electronic disclosure of the numerical credit score used to take the adverse action, or when providing a “risk-based pricing” notice. Provide the consumer with an oral, written or electronic notice, which includes the below information:  Name, address and telephone number of CRA that supplied the report, if nationwide. A statement that the CRA did not make the adverse decision and therefore can’t explain why the decision was made.  Notice of the consumer’s right to a free copy of their report from the CRA, if requested within 60 days.  Notice of the consumer’s right to dispute with the CRA the accuracy or completeness of any information in a consumer report provided by the CRA. Provide the consumer with a “risk-based pricing” notice if credit was granted but on less favorable terms based on information in their consumer report. We understand how challenging it is to understand and meet all your obligations as a data furnisher – we’re here to make it a little easier. Click below to speak with a representative and gain more insight on how the CARES Act impacts FCRA reporting. Download overview Speak with a representative 1An “accommodation” is defined as “an agreement to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief” granted to a consumer affected by COVID-19 during the covered period. 2This FCRA overview is not legal guidance and does not enumerate all your requirements under the FCRA as a user of consumer reports. Additionally, this FCRA Overview is not intended to provide legal advice or counsel you regarding your obligations under the FCRA or any other federal or state law or regulation. Should you have any questions about your institution’s specific obligations under the FCRA or any other federal or state law or regulation, you should consult with your Legal Counsel. 3This FCRA overview is intended to be used solely by financial service providers when extending credit to consumers and does not include all FCRA regulatory obligations. You are responsible for regulatory compliance when requesting and using consumer reports, which includes adhering to all applicable federal and state statutes and regulations and ensuring that you have the correct policies and procedures in place.

In the face of severe financial stress, such as that brought about by an economic downturn, lenders seeking to reduce their credit risk exposure often resort to tactics executed at the portfolio level, such as raising credit score cut-offs for new loans or reducing credit limits on existing accounts. What if lenders could tune their portfolio throughout economic cycles so they don’t have to rely on abrupt measures when faced with current or future economic disruptions? Now they can. The impact of economic downturns on financial institutions Historically, economic hardships have directly impacted loan performance due to differences in demand, supply or a combination of both. For example, let’s explore the Great Recession of 2008, which challenged financial institutions with credit losses, declines in the value of investments and reductions in new business revenues. Over the short term, the financial crisis of 2008 affected the lending market by causing financial institutions to lose money on mortgage defaults and credit to consumers and businesses to dry up. For the much longer term, loan growth at commercial banks decreased substantially and remained negative for almost four years after the financial crisis. Additionally, lending from banks to small businesses decreased by 18 percent between 2008-2011. And – it was no walk in the park for consumers. Already faced with a rise in unemployment and a decline in stock values, they suddenly found it harder to qualify for an extension of credit, as lenders tightened their standards for both businesses and consumers. Are you prepared to navigate and successfully respond to the current environment? Those who prove adaptable to harsh economic conditions will be the ones most poised to lead when the economy picks up again. Introducing the FICO® Resilience Index The FICO® Resilience Index provides an additional way to evaluate the quality of portfolios at any point in an economic cycle. This allows financial institutions to discover and manage potential latent risk within groups of consumers bearing similar FICO® Scores, without cutting off access to credit for resilient consumers. By incorporating the FICO® Resilience Index into your lending strategies, you can gain deeper insight into consumer sensitivity for more precise credit decisioning. What are the benefits? The FICO® Resilience Index is designed to assess consumers with respect to their resilience or sensitivity to an economic downturn and provides insight into which consumers are more likely to default during periods of economic stress. It can be used by lenders as another input in credit decisions and account strategies across the credit lifecycle and can be delivered with a credit file, along with the FICO® Score. No matter what factors lead to an economic correction, downturns can result in unexpected stressors, affecting consumers’ ability or willingness to repay. The FICO® Resilience Index can easily be added to your current FICO® Score processes to become a key part of your resilience-building strategies. Learn more

There are more than 100 million people in the United States who don’t have a fair chance at access to credit. These people are forced to rely on high-interest credit cards and loans for things most of us take for granted, like financing a family car or getting an apartment. At Experian, we have a fundamental mission to be a champion for the consumer. Our commitment to increasing financial inclusion and helping consumers gain access to the financial services they need is one of the reasons we have been selected as a Fintech Breakthrough Award winner for the third consecutive year. The Fintech Breakthrough Awards is the premier awards program founded to recognize the fintech innovators, leaders and visionaries from around the world. The 2020 Fintech Breakthrough Award program attracted more than 3,750 nominations from across the globe. Last year, Experian took home the award for Best Overall Analytics Platform for our Ascend Analytical Sandbox™, a first-to-market analytics environment that promised to move companies beyond just business intelligence and data visualization to data insights and answers they could use. The year prior, Experian won the Consumer Lending Innovation Award for our Text for Credit™ solution, a powerful tool for providing consumers the convenience to securely bypass the standard-length ‘pen & paper’ or keystroke intensive credit application process while helping lenders make smart, fraud protected lending decisions. This year, we are excited to announce that Experian has been selected once again as a winner in the Consumer Lending Innovation category for Experian Boost™. Experian Boost – with direct, active consumer consent – scans eligible accounts for ‘boostable’ positive payment data (e.g., utility and telecom payments) and provides the means for consumers to add that data to their Experian credit reports. Now, for the very first time, millions of consumers benefit from payments they’ve been making for years but were never reflected on their credit reports. Since launching in March 2019, cumulatively, more than 18 million points have been added to FICO® Scores via Experian Boost. Two-thirds of consumers who completed the Experian Boost process increased their FICO Score and among these, the average score increase has been more than 13 points, and 12% have moved up in credit score category. “Like many fintechs, our goal is to help more consumers gain access to the financial services they need,” said Alex Lintner, Group President of Experian Consumer Information Services. “Experian Boost is an example of our mission brought to life. It is the first and only service to truly put consumers in control of their credit. We’re proud of this recognition from Fintech Breakthrough and the momentum we’ve seen with Experian Boost to date.” Contributing consumer payment history to an Experian credit file allows fintech lenders to make more informed decisions when examining prospective borrowers. Only positive payment histories are aggregated through the platform and consumers can remove the new data at any time. There is no limit to how many times one can use Experian Boost to contribute new data. For more information, visit Experian.com/Boost.  

In today’s age of digital transformation, consumers have easy access to a variety of innovative financial products and services. From lending to payments to wealth management and more, there is no shortage in the breadth of financial products gaining popularity with consumers. But one market segment in particular – unsecured personal loans – has grown exceptionally fast. According to a recent Experian study, personal loan originations have increased 97% over the past four years, with fintech share rapidly increasing from 22.4% of total loans originated to 49.4%. Arguably, the rapid acceleration in personal loans is heavily driven by the rise in digital-first lending options, which have grown in popularity due to fintech challengers. Fintechs have earned their position in the market by leveraging data, advanced analytics and technology to disrupt existing financial models. Meanwhile, traditional financial institutions (FIs) have taken notice and are beginning to adopt some of the same methods and alternative credit approaches. With this evolution of technology fused with financial services, how are fintechs faring against traditional FIs? The below infographic uncovers industry trends and key metrics in unsecured personal installment loans: Still curious? Click here to download our latest eBook, which further uncovers emerging trends in personal loans through side-by-side comparisons of fintech and traditional FI market share, portfolio composition, customer profiles and more. Download now  

What is CECL? CECL (Current Expected Credit Loss) is a new credit loss model, to be leveraged by financial institutions, that estimates the expected loss over the life of a loan by using historical information, current conditions and reasonable forecasts. According to AccountingToday, CECL is considered one of the most significant accounting changes in decades to affect entities that borrow and lend money. To comply with CECL by the assigned deadline, financial institutions will need to access much more data than they’re currently using to calculate their reserves under the incurred loss model, Allowance for Loan and Lease Losses (ALLL). How does it impact your business? CECL introduces uncertainty into accounting and growth calculations, as it represents a significant change in the way credit losses are currently estimated. The new standard allows financial institutions to calculate allowances in a variety of ways, including discounted cash flow, loss rates, roll-rates and probability of default analyses. “Large banks with historically good loss performance are projecting increased reserve requirements in the billions of dollars,” says Experian Advisory Services Senior Business Consultant, Gavin Harding. Here are a few changes that you should expect: Larger allowances will be required for most products As allowances will increase, pricing of the products will change to reflect higher capital cost Losses modeling will change, impacting both data collection and modeling methodology There will be a lower return on equity, especially in products with a longer life expectancy How can you prepare? “CECL compliance is a journey, rather than a destination,” says Gavin. “The key is to develop a thoughtful, data-driven approach that is tested and refined over time.” Financial institutions who start preparing for CECL now will ultimately set their organizations up for success. Here are a few ways to begin to assess your readiness: Create a roadmap and initiative prioritization plan Calculate the impact of CECL on your bottom line Run altered scenarios based on new lending policy and credit decision rules Understand the impact CECL will have on your profitability Evaluate current portfolios based on CECL methodology Run different loss methods and compare results Additionally, there is required data to capture, including quarterly or monthly loan-level account performance metrics, multiple year data based on loan product type and historical data for the life of the loan. How much time do you have? Like most accounting standards, CECL has different effective dates based on the type of reporting entity. Public business entities that file financial statements with the Security and Exchange Commission will have to comply by 2020, non-public entity banks must comply by 2022 and non-SEC registered companies have until 2023 to adopt the new standard. How can we help: Complying with CECL may require you to gather, store and calculate more data than before. Experian can help you comply with CECL guidelines including data needs, consulting and loan loss calculation. Experian industry experts will help update your current strategies and establish an appropriate timeline to meet compliance dates. Leveraging our best-in-class industry data, we will help you gain CECL compliance quickly and effectively, understand the impacts to your business and use these findings to improve overall profitability. Learn more

Unsecured lending is increasing. And everyone wants in. Not only are the number of personal loans increasing, but the share of those loans originated by fintech companies is increasing. According to Experian statistics, in August 2015, 890 new trades were originated by fintechs (or 21% of all personal loans). Two years later, in August 2017, 1.1 million trades belonged to fintechs (making up 36% of trades). This increase is consistent over time even though the spread of average loan amount between traditional loans and fintech is tightening. While convenience and the ability to apply online are key, interest rates are the number one factor in choosing a lender. Although average interest rates for traditional loans have stabilized, fintech interest rates continue to shift higher – and yet, the upward momentum in fintech loan origination continues. So, who are the consumers taking these loans? A common misconception about fintechs is that their association with market disruption, innovation and technology means that they appeal vastly to the Millennial masses. But that’s not necessarily the case. Boomers represent the second largest group utilizing fintech Marketplace loans and, interestingly, Boomers’ average loan amount is higher than any other generational group – 85.9% higher, in fact, from their Millennial counterparts. The reality is the personal loan market is fast-paced and consumers across the generational spectrum appear eager to adopt convenience-based, technology-driven online lending methods – something to the tune of $35.7 million in trades. For more lending insights and statistics, download Experian’s Q2 2018 Personal Loans Infographic here.   Learn More About Online Marketplace Lending Download Lending Insights

A recent survey focusing on the credit behavior of Millennials (age group 18 to 30) shows that 90 percent are familiar with cosigning and two-thirds have used a cosigner in the past.

Findings from the most recent Experian State of the Automotive Finance Market report show outstanding automotive loan balances increased 11 percent from Q4 2012, reaching $798.5 billion in Q4 2013 — the highest level since 2007.

VantageScore Solutions’ analysts recently examined how many accounts consumers with prime credit scores typically have in their credit file. Consumers who generally qualify for loans have an average of 13 loans in their credit files, and typically the oldest loan is more than 15 years old.