Alternative Data Scoring Model to Spur Growth at Prestige Financial

Prestige Financial Services launched a new scorecard in the first quarter that relies more heavily on alternative data to analyze non-traditional aspects of an applicant’s financial history to determine creditworthiness, Chief Operating Officer Richard Hyde told Auto Finance News.

“We are using alternative data in many ways and combinations, and that gives us more opportunities to lend to people,” he said. The new scorecard evaluates more than 1,000 data attributes, compared with a handful that Prestige had used in a previous experiment. “I think it will have a major role in our continued growth,” Hyde said, adding that he expects the company to grow 4% to 5% this year, primarily this quarter and next.

In early 2017, the company tightened its risk modeling, which resulted in a 15% year-over-year decline in loan originations and worsening loan performance. “We have seen losses and delinquencies come back in line, even greater than we anticipated,” Hyde said.

In the fourth quarter of 2017, Prestige’s delinquency rate declined to 4.1% of total outstandings, compared with 5.5% in the year prior. Hyde said he had anticipated a milder decrease in delinquencies, but loans wound up performing 48 basis points better than expected. Alternative data has been seen as an attractive way for lenders to expand originations without increasing risk.

The alternative data attributes establishing better creditworthiness include cell phone numbers supplied on previous loan applications or occupational licenses. These types of attributes can help build a more robust profile for borrowers with limited or outdated credit histories, like minority consumers, those from low-income households, and first-time borrowers.