Nontraditional data for assessing risk will be more widely used by auto financiers this year, said FactorTrust Chief Executive Greg Rable, due in part to rising competition in the subprime space.
“I think everyone is looking at how can they lower risk, how can they book more loans, how can they provide more options for consumers,” Rable told Auto Finance News. “So they’re looking for more data, or an ability to separate themselves from others.”
Rable, who defines nontraditional data as alternative tradelines or other information unavailable from traditional credit bureaus, also predicts a rising interest among lenders to capture millennials as customers.
Millennials tend to show up as higher risk than some consumer segments, Rable said, because they’re younger, are typically in the earlier stages of their careers, and their incomes tend to be lower than some of the older consumer segments. However, the number of millennials now joining the workforce, coupled with the fact that “they tend to be more educated,” makes them a “great risk,” Rable said.
“A lot of people are really focused heavily on them from that standpoint, and you can’t argue with the fact that if you fast-forward the clock 10 to 15 years, they’re going to make up approximately 75% of the workforce,” he added.
Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.
