Used-car retailer Tricolor is developing an “alternative credit bureau” for buy-here-pay-here consumers based on their “ability to pay, versus intent to pay,” Chief Executive Daniel Chu told Auto Finance News.
“If consumers can prove through their employment behavior that they are consistent with applying themselves, [Tricolor] believes that is deserving of extending better finance terms,” Chu said. Specifically, the company can track the consistency of a consumer’s hourly work schedule to help determine their reliability as a borrower.
Tricolor estimates that the majority of buy-here-pay-here operators are not reporting to the credit bureaus in an attempt to prevent borrowers from moving up the credit tier and to “keep those customers captive,” he said.
However, Tricolor has a different approach. “With us, you can ultimately access better financing because we are going to allow you the opportunity to build credit,” Chu said. “It’s our responsibility to help those customers build credit and that in turn will help drive new customers.”
Tricolor has yet to onboard lenders for the alternative credit bureau, but the company believes lenders could benefit by serving an unattended group of consumers who may not qualify for a loan based on traditional terms or typically receive “unrealistic terms,” he said.
According to the Consumer Financial Protection Bureau, 26 million consumers have no credit history with the three major credit bureaus and an additional 19 million are “unscoreable.”