More thin files? Technology can help

Burns: Lenders and credit bureaus are increasingly consulting “nontraditional” consumer data and new data analysis to help assign a credit score to thin-file customers.

Dealerships and auto lenders are encountering an increase in “thin files” -- loan applicants who don’t have enough credit history to generate a credit score using traditional methods, experts said in a series of interviews and presentations.

While some millennials may have student debt and credit card balances, many got a late start on mortgages and auto loans -- two generators of data that traditional credit scores take heavily into account, the experts said. Definitions vary, but J.D. Power and Associates defines millennials as those who were born between 1977 and 1994.

“A lot of [the growth in] thin files, to me, is the millennials coming up,” said Scott Hendriks, senior product manager of automotive loan origination system for software provider Fiserv Inc., of Brookfield, Wis.

“They were spending money on things other than cars and houses,” he told Automotive News in an interview. “Your risk [prediction accuracy] is only as good as your data,” Hendriks said.

Fleshing out thin files

Millennials aren’t the only ones responsible for an increase in thin files. Since the economic downturn some consumers have remained more conservative about borrowing in general. Also, some consumers are coming back to the market with thin files, reflecting the fact that they did less borrowing after their credit was dinged in the recession, experts said.

One answer to the problem is that lenders and credit bureaus are increasingly consulting “nontraditional” consumer data and new data analysis to help assign a credit score to thin-file customers, said Barrett Burns, CEO of VantageScore Solutions, of Stamford, Conn.

Burns told Automotive News last month that his company is rolling out a new method to assign credit scores to an estimated 30 million to 35 million consumers who were “invisible” to traditional credit scores.

New data, new math

That new method is based on access to nontraditional data, he said. Experts said nontraditional data includes a growing online database of credit history for other kinds of accounts such as rental payments and utility and cellphone bills that were not reflected in older credit scoring models. VantageScore also has developed new computer models since the recession for predicting creditworthiness, Burns said.

VantageScore is an independently managed company that was created by the three major credit reporting companies -- Equifax, Experian and TransUnion -- to provide a credit-scoring model based on consumer payment data that all three companies could use.

The first VantageScore model launched in 2006. The newest version, now being introduced, is VantageScore 3.0.

The problem of thin files, which extends beyond auto retailers, has led alternative credit reporting to become a minor growth industry, particularly since the Great Recession.

VantageScore led nine companies identified by in November as the best at using technology and nontraditional data to determine consumers’ creditworthiness. Others on the list: CoreLogic, Zoot Enterprises, L2C, MicroBit, ID Analytics, eCredable, LexisNexis and Clarity Services.

Dealership actions

Dealerships can also help lenders collect nontraditional data on customers, said Paul McCarthy, F&I director at Stevenson Automotive Group in Jacksonville, N.C., in a recent Automotive News webinar. That webinar, “F&I Trends to Watch in 2015,” is available at

In addition to checking online databases, McCarthy said, dealerships should conduct thorough customer interviews. Data such as the value of the customer’s home, whether they have a criminal history, how often they change addresses, whether they are a college graduate or what kind of professional license they may hold are examples of potentially relevant information, he said.

The goal, of course, is to provide lenders with the information they need to approve the loan and thereby get the deal done.

“This nontraditional data will also be beneficial in going after the growth in the number of millennials with thin files. I believe often millennials have little other than credit-card debt on their records,” he said. “But when their buying power expands, buyers will have to look for nontraditional data in order to score them accordingly.”

You can reach Jim Henry at

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