Yes! Here’s how:

If your financial institution is looking to increase its loan portfolio by reaching more consumers, especially younger ones, you may need to take a closer look at alternative data. Although we are making headway through the pandemic, there is still a long road ahead of us as we acclimate to our ‘new normal.’ Several members made it through virtually unscathed and others were considerably affected and continue to struggle to pick up the pieces and put their lives back together. Many credit unions and banks helped by offering forbearance programs.

While these efforts benefited many in the short term, for the long haul financial institutions can use alternative credit data to assist more nonprime borrowers who have trouble accessing mainstream lending.

A low credit score is not the equivalent of mismanaging money. If anything, this pandemic has taught many people how to manage their money better than ever before due to our collective extenuating circumstances. For example, if a borrower is simply trying to get a loan to purchase a car to get to and from work, but their credit report has a ding or two, they may find it difficult to get the car they need based on credit score alone. This member would benefit greatly from a lender using alternative credit data, such as payment history regarding utilities, cell phones, cable bills, rent, or mortgage and even using bank account information as well. There are some exceptional options available to consumers that rely on alternative data.

According to Experian’s State of Credit 2021 Report, the average 90–180 days past due delinquency rates in 2019 were 6.6%, 2020 were 3.8%, and in 2021 down to 2.5% – a significant decrease. Furthermore, The Financial Brand reports “decreases in three important measures — credit card balances, utilization rates, and missed payments — are driving this upward trend. Today, the average credit card balance is $5,525, down from $5,897 in 2020 and $6,494 in 2019. Delinquencies also declined year-over-year, with the average 30-59 days past due delinquency rates dropping from 2.4% in 2020 to 2.3% in 2021. This decrease in delinquencies shows, despite significant pandemic-related challenges, how consumers are continuing to make responsible choices to protect their financial health.”

So, what does this mean for your bank or credit union moving forward? It means that using alternative data, like that provided through our Lenders Protection™ platform, will give your institution a better, more inclusive snapshot of your potential borrowers. Paired with our default insurance coverage for near-prime and nonprime auto loans can not only help your financial institution increase your interest-income spread and grow your auto loan portfolio, but it also can build a better relationship with your customers and members.