Alternative Credit Scoring Helps Credit Unions Adapt to New Normal

Written by John Flynn | Jul 1, 2020 8:39:00 PM

The U.S. looked like it was ready to start entering the post-coronavirus world and began easing stay-at-home orders, but unfortunately, we’re now seeing a resurgence in the virus in some areas. Many credit unions are wondering how to move forward. They still have business to complete and members to support, but how do you generate new business in this realm of uncertainty?

Clearly, traditional methods are no longer suitable for long-term growth and prosperity. This new normal will continue long after the coronavirus pandemic has passed as people learn new routines. New mindsets, approaches and tools will clearly help businesses evolve – and much of that is built in the digital world.

Open Lending is always here to help you say ‘yes’ to more auto loans, no matter the crisis!

Digital transformation, from how we market and close loans to portfolio risk analysis modeling. Leveraging data in all of these processes is critical to send the right message to the right members at the right time as well as ensuring the loans you’re making – particularly in the nonprime spectrum – are safe and secure.

Patterns in Auto Loan Inquiries During Corona

The difference between superprime and near- and non-prime auto loan demand likely reflects superprime borrowers’ flexibility to elect not to replace their relatively newer and better made vehicles versus those with near and non-prime credit. Open lending can help credit unions quench some of that non-prime demand with the accuracy of the LP Score and default insurance.

Open Lending’s Lenders Protection™ rescores potential borrowers based upon our proprietary LP Score with greater precision and accuracy than the FICO score alone. At 99.2% accuracy, we’re confident in insuring defaults on auto loans through our system, too! In fact, Open Lending’s Lenders Protection™ recently won NAFCU Services 2020 Innovation Award!

Clearly, moves to leverage technology and technology partners to parse larger sets of data will help you monitor your portfolio and make better lending decisions. Use analytics to see which products are succeeding, which aren’t, and which need updating.

During the coronavirus pandemic, credit union members are experiencing unprecedented unemployment, as well as government support. Are credit unions looking beyond the credit score to help their members recover? Decisions based on various alternative data, like that provided by Lenders Protection™, can give you a more comprehensive picture – information such as home ownership, geography, and age, make and model of a vehicle provide a deeper view of how they’ll manage repayments. During the 2008-09 Great Recession, nearly all of Open Lending’s clients continued to hit their ROI targets. Lenders Protection™ is proven effective in crisis.

Just like your credit union is unique, so is each member and they can’t be boiled down to a simple number. Embrace the current complexity and use it to your advantage for growth as a foundation for long-term success. The more data your credit union leverages, the better picture you can paint of each individual, allowing you to win more business at higher returns and lower risk levels.

As we all adapt to a world with coronavirus, we also must prepare for long-term prosperity despite circumstances. Credit unions have an opportunity to accelerate their transformation to grow loans and strengthen relationships with your members. Evolving your credit union’s business is more than just weathering this storm; it’s investing to fuel long-term growth.

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