LAS VEGAS — Lenders are making alternative data a more integral part of the underwriting process. In the subprime sector, alternative data can paint a clearer picture and better assist lenders in assuming comfortable risk levels.
“The more information you can have, the better a decision you can make and potentially price loans the right way and capture more contracts,” Burke George, regional executive director of consumer credit operations at Ally Financial, told conference-goers at the Auto Finance Summit.
“There are populations that are not heavily ‘banked,’ and alternative data is a great way to hone that.” Underwriting models that use a combination of alternative data and traditional metrics have led to favorable outcomes at Chicago-based regional lender Turner Acceptance Corp.
“Alternative data has been a wonderful component to our credit models,” said panelist Jonathon Levin, Turner’s president and chief executive.
Utility bills and the frequency with which cell phones or addresses change play into how thin-file or subprime consumers’ loans will perform, Levin said. “If you take all that and you put it through the blender with regular Fico scores and any other type of credit report, it helps tell a good story,” he said.
In fact, that kind of data can be critical in getting customers into the right loans and reducing the likelihood of default. However, the panelists cautioned against relying solely on alternative data.
“The greatest influence on performance isn’t one particular attribute, it’s sticking to your [underwriting] guidelines,” Levin said. “Data tells a beautiful story, but experience tells an even better story, [as does] making sure that if you’re making exceptions, they make sense.”
