During the new realities of the current economic crisis, financial marketers are wondering how to mitigate delinquencies and defaults in order to preserve their consumer credit portfolios. As you may already know, account management programs help keep you ahead of risk and find opportunity inside your customer portfolios. But you may not be aware of some specific ways to use solutions to proactively manage portfolio performance.
1. Monitor new employment changes
With increasing unemployment during COVID-19, it’s worth looking more closely at two significant key indicators: change in employment or income. This can help better evaluate a consumer’s ability to pay their debt obligations.
Employment data offers the quickest way to tell if you have customers who have lost their job or are on a reduced salary.
Near-real-time employment data can be infused into your decision-making to help you gain a broader perspective. By assessing consumer stability you’ll gain deeper insights about their ability to pay their debt. This can help inform credit line management, loan or payment modification, contact prioritization and credit reissue decisioning.
Our Customer Portfolio Review includes employment and salary income information from The Work Number, a proprietary database owned by Equifax. The database houses payroll information from hundreds of thousands of employers nationwide. Including Fortune 500 companies, as well as small, regional and local employers.
Adding this layer of review allows you to stay on top of one of the most important factors of your customers’ financial situations.
2. Increase portfolio reviews and add triggers
With the pandemic causing fast-changing market conditions, it’s critical to increase the frequency of your account reviews. You want to be sure you have the most current updates on your customers’ status and segments of your portfolio. You’ll want more frequent credit data points to know what your customer is experiencing and their capacity to withstand undulation.
Doing reviews annually, semi-annually or even quarterly may not be often enough.
We strongly recommend that companies increase the frequency of their portfolio reviews to monthly.
You can easily configure your Customer Portfolio Review to give you tailored, highly specific details as COVID-19 plays out. This data can reveal everything from current credit status and debt-to-income ratios to even the potential for future bankruptcy. Custom attributes, account management models and scores can also be added for a more tailored solution.
To get even more granular information and trends in near-real-time, add some Account Management Triggers to your reviews. These alerts can tell you when people stop paying their financial obligations, such as a mortgage, auto loans or other debts. They can also help identify consumers with recent changes in credit activity, near-term risk of default or late payments.
Additionally, you should consider implementing a monthly or weekly trigger program that flags just those accounts that are at risk. This can save you from having to perform an entire portfolio review every month or quarter. Because triggers are also customizable, they allow you to focus on the types of delinquencies that matter to you. Delinquency types include mortgage, personal finance, retail, HELOC, student loan, auto loan and credit card.
3. Measure consumer resilience
Despite what you may read in the news, many people are still resilient and will ride out the turbulence just fine.
It will be important for lenders to understand their customers and prospects’ differing levels of resilience. We recommend using a resilience measure such as the Equifax FICO Resilience Index. This helps credit marketers rank order consumers with respect to their resilience or sensitivity to an economic downturn. Higher resilience consumers tend to have fewer credit inquiries, fewer active accounts and lower total revolving balances.
This can help answer questions such as, “which ‘680’ consumers are more likely to go seriously delinquent during economic stress?” And such measures can help you potentially avoid taking broad measures that impact insensitive or more resilient consumers unnecessarily.
Remember, you don’t have to be a big, sophisticated enterprise to take advantage of these customer account management techniques. For organizations who may want more simple solutions requiring fewer resources to implement and manage, those options are also available.
See how you can use these solutions to maximize performance in your portfolio while you ride out these turbulent times.
Note: All products referred to in this article are considered credit reports and their use is regulated by the Fair Credit Reporting Act (FCRA).
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