Consumer Portfolio Services is experiencing higher capture rates as a result of a new scorecard that was implemented last year, Senior Vice President of Risk Management Chris Terry told Auto Finance News.
Nine months post-implementation, “CPS is seeing the results without negatively impacting our pricing,” Terry said. The difference between CPS’s new consumer-focused scorecard versus its traditional scorecard is the use of alternative data.
“We incorporated alternative data and that gave [the scorecard] a lot of lift,” Terry said. “This scorecard incorporates segmentation in terms of the predictive characteristics of the consumer.”
Here’s how it works without spilling the “secret sauce,” Terry said. The new scorecard takes the characteristics of a consumers’ application and produces different segments, and each of those segments, in a way, is its own scorecard. “One segment may use different attributes to produce a score, while another segment may go through the regression and come up with different attributes for scoring,” he explained.
Ultimately, the scorecard gives CPS a better view of the separation of a consumers’ information within the application, which, in turn, allows for better assessment of risk and pricing, and provides a more definitive picture of the borrower.
“An application that was maybe on the borderline between two tiers, we can leverage this scorecard and its alternative data to move the customer to the higher tier,” he said. The “scorecard is more definitive, so we get better capture rates.”
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