Alternative data help lenders reach more creditworthy customers

Mondelli: "We have seen immense interest from lenders in reaching consumers who may not have been traditional prospects.”

Lenders are using alternative data to evaluate the creditworthiness of consumers with scant credit history, with auto lenders becoming especially adept at plumbing data sources, TransUnion said.

A TransUnion survey of 317 lenders, conducted by Versta Research, showed how lenders are using alternative data to better assess risk and pricing for consumers with no credit report or an insufficient credit history, according to the credit bureau.

Alternative data can include, among other things, property, tax and deed records, debit and checking account information and payday lending information.

The TransUnion survey participants included, among others, auto and mortgage lenders and credit card companies. The survey found that 87 percent of lenders reject some credit applicants because they cannot be scored. However, 83 percent of those using alternative data to score applicants said they have seen “tangible benefits.” And about two-thirds of the respondents said alternative data had helped them reach more creditworthy consumers, TransUnion said in a statement last week.

Auto lenders made up about a quarter of the survey’s participant pool, Mike Mondelli, TransUnion’s senior vice president of alternative data services, told Automotive News on Tuesday. In the auto space, the adoption rate for using alternative data is between 85 and 90 percent, he said.

“Auto is really the leader because the underwriting process is robust in terms of all the data they ask for,” Mondelli said. “As I think about larger participants in [the auto lending] space, I can’t think of one who’s not doing something with alternative data.”

Untraditional prospects

TransUnion is a player in the alternative data arena. It released its credit scoring application CreditVision Link last year. The application combines credit bureau data and alternative data sources to enable lenders to score up to 95 percent of the U.S. adult population, according to TransUnion. As many as 60 million previously unscorable consumers can be scored with CreditVision Link, TransUnion says.“In just the last few months, we have seen immense interest from lenders in reaching consumers who may not have been traditional prospects,” he said in a statement.

CreditVision Link shows up to 30 months of historical information, including payment history, such as dollars paid, amount paid vs. minimum due, and the amount borrowed over time.

“This is especially important because a traditional credit report may tell you a consumer has $5,000 in credit card debt, but one using trended data will show you whether they have built up or paid down that balance over time,” Mondelli said.

Mondelli hopes CreditVision Link will expand beyond the lender-dealer relationship and overlap to the dealer-consumer relationship, he said.

“We’re trying to go down that path. We want to expose the score to consumers,” he said.

That could mean making the modified score available on a dealership’s rate sheet some day, he said. “To date, we have not quite crossed that bridge,” he said. “A lot of lenders want it to be proprietary.”

You can reach Hannah Lutz at -- Follow Hannah on Twitter: @hm_lutz

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